Document Type: 
Document Number (FOIA) /ESDN (CREST): 
Release Decision: 
Original Classification: 
Document Page Count: 
Document Creation Date: 
December 15, 2016
Document Release Date: 
March 1, 2004
Sequence Number: 
Case Number: 
Publication Date: 
September 19, 1977
Content Type: 
PDF icon CIA-RDP80M00165A002500040027-5.pdf7.88 MB
Direftirs Hon Doan Chairman d, ? - ~@~Ib YMk1~F ~ ~ ~~LLLKF ii-7 IlUUe Honorary Chairman Gene E. Bradley President ' John S. R. Schoenfeld Watergate Office Building-Suite 905 2600 Vir foie Avenue NW xecutive Vice President g Fe.er?F,, Hon. Theodore C. Achilles n r Dl1/1T7 . To.t (' fl' 47210')') . T.L, v ? TTTTIT 7AQf.O2 "?r vice cmmn., Huanuc council ~ , Professor Edward C. Bursk l / 3 Hon. Editor, Harvard Bus. Review -f "' z vreess.I ?,"orld Trade September 19, 1977 Vice P., IBM W Europe/Middle East/Africa Corp. Gen. Lucius D. Clay, USA (Ret) Henry FI. Geyelin Pres., Council of Americas Walter E. Headley Exec V.P., Bank of America Tom Killefer Pres., U.S. Trust Co. of New York Dr. Antonia T. Knoppers Former Vice Chmn., Merck & Co. Dr. Alexander Lewis, Jr. Pres., Gulf Oil Foundation Hon. Paul W. McCracken Univ. of Michigan Hon. Lawrence C. McQuade Vice Pres., W. R. Grace & Co. H. E. Egidio Ortona Chmn., Honeywell Info. Systems Italia, former Amb. of Italy to U.S. Hon. Frank Pace, Jr Admiral St ans f ield Turner . Pros., IESC Wylie S S. . Robson Director of Central Intelligence Exec. V.P., Eastman Kodak Reinaldo Scarpetta Washington, D. C. 20505 IMDI Director, Latin America Board of Advisors Giovanni Agnelli Dear Stan: Pres., Fiat S.p.A. Dr. Vernon R. Alden Chmn., Boston Co. Hon. Willis C. Armstrong We are looking forward to your participation as our dinner U.S. Council, Int'l. CoC Robert W. Barnett speaker for the December 5 Joint Council Quarterly Meeting, Dir., Wash. Ctr., Asia Society Dr. Daniel Bendahan to be held in the Kennedy Center. We will be writing you in Pres., AVE, Caracas Frank Briceno Fortique the next few weeks with further details. Pres., Gerencia & Desarrollo, Caracas Hon. W. Randolph Burgess Vice Chmn.,Atlantic Council In the meantime, however, we would like to provide you with John L. Caldwell y y Mgr., Int'l Div., Cocof US the enclosed copy of our just-published Top Management Report John G. Crean Pres., Robert Crean & Co., Ltd. on "Government-Business Cooperation in Meeting World Needs." Philippe J. Dennis Reg. er.rn Europe Conference Board Southern 'Re ort presents parallel statements by Chiefs of State Lawrence A' Fox Vice Pres., NAM and Corporate Chief Executives on what governments expect of Dr. Arthur Furor Managing Dir., Nestle Alimentana S.A. foreign international corporations -- and what international Gen. Alexander Haig, Jr Supreme Allied d Commander Europe, corporations expect of foreign governments. We are honored SHAPE Hon. Br indeed that the introductory statement is by President Jimmy yyc. V.P., ProectN er& Harlow Gamble Co. Carter. Hon. Martin J. Hillenbrand Dir. Gen., Atlantic Inst., Paris Claire Giannini Hoffman Bertrand Hommey With best wishes. Patronat Francais Paris , Shigeo Herte Sr. Advisor, Bank of Tokyo, Ltd. Fisher Howe Dr. Herman Kahn Dir., Hudson Institute Ivan Lansberg Henriquez Pres., SEGUROSCA, Caracas Dr. J. Sterling Livingston Pres., Sterling Institute Carlos Llano Cifuentes IPADE, Mexico City Dr. Rodrigo Llorente Martinez Pres., CICYP, Bogota Mary P. Lord At/anfic Institute Hon. Winston Lord Pros., Council on Foreign Relations JonkhearJohn H. Loudon Theme,; D. Lumpkin Pres., Gulf-Latin America Hon. George C. McGhee Tatsuzo Mizukami Pres., IMAJ, Tokyo Dr. Clifford C. Nelson Pros,, American Assembly Hon. Frederick E. Notting, Jr. Dr. Aurelio Peccei Chmn., Italconsult Co., Rome John P. Phelps, Jr. Dir., Fund for For. Inv., Caracas Ch. Scrivener Sec'y of St. Consumer Affs., Paris Ralph E. Smiley Chmn., Booz, Allen & Hamilton Int'l Albert T. Sommers Sr. V, P. & Chief Economist The Conference Board Washington SyCip Manila, Philippines Hon. Alexander B. Trowbridge Vice Chmn., Allied Chemical Corp. Hon. John W. Tuthill Pres., The Salzburg Seminar Dr. Jose J. Urdaneta R. Pres., VECSA, Caracas Carl-Henrik Winqwist Sec'y Gen., Int'l CoC, Paris Approveth Dr. Boris Yavitz Dean, Grad. Bus. Sch., Columbia U. The George Washington University and the Fund for Multinational Management ucatlon. - 177 'r F F,Y bat eTB?0A0W%pQAQDR)8 O&VAM 5 N i4 SiNti lie .. ApproveVWIV Rel se 2004/03/16: CIA-RDP80fWW65A002500040027-5 Top management Report on: GOVERNMENT-BUSINESS PTIMEETING WORLD NEEDS H. E. Jose Lopez Portillo President Mexico HE. Giulio Andreotti Prime Minister Italy Giovanni Agnelli Chairman Fiat S p A H. E. Takeo Fukuda Prime Minister Japan H. E. Suharto President Republic of Indonesia H.E. Johannes Marten den Uyl T.R.H. Roy Harris Jenkins Prime Minister President Commission of The Netherlands the European Communities Arthur Firer Managing Director Nestle. S A. T.R.H. John Malcolm Fraser H.E. Anwar El-Sadat Prime Minister President Australia Arab Republic of Egypt HE. Fernand Spaak Head, Deleg. of the Commission of the European Communities H.E. Joseph M.A.H. Luns Secretary General NATO Donald E. Stingel Former President Pullman Swindell C. Peter McColough Chairman & CEO Xerox Corporation U.S. President Jimmy Carter provides the introductory state- ment for this Top Management Report on "What Govern- ments Expect of Foreign International Corporations-and What International Corporations Expect of Foreign Govern- ments." Robert D. Campbell Chairman & Publisher Newsweek. Inc INTERNATIONAL MANAGEMENT AND DEVELOPMENT INSTITUTE Approved For Releal;t..2004/03/16: CIA-RDP80MOO165AOOZOO 40027-5 Government-Business Cooperation In Meeting World Needs This Top Management Report is in- tended for senior executives of in- ternational corporations, government officials, university professors, and others who share a professional in- terest in government-business rela- tiionships and the role of U.S. Inter- national corporations in the global community. The International Management and Development Institute wishes to ex- tend its sincere appreciation to the U.S. Department of State's Bureau of Educational and Cultural Affairs and those senior representatives of busi- ness, government, and private organ- izations whose cooperation and sup- port made this Report possible. In publishing the Report, we believe that great educational value may be derived from the presentation of di- verse-and sometimes conflicting- viewpoints on this subject. It should be noted that the views expressed by the authors are their own, and not necessarily those of this Institute or ally of the organizations or individuals with whom the Institute is associated. CONTENTS 1 Foreword Edward C. Bursk and Gene E. Bradley 5 Introductory Message U.S. President Jimmy Carter 6 Government Section: What Governments Expect of Foreign International Corporations 7 Mexico: President Jose Lopez Portillo 11 Japan: Prime Minister Takeo Fukuda 13 Republic of Indonesia: President Suharto 15 Australia: Prime Minister John Malcolm Fraser 19 Arab Republic of Egypt: President Anwar El-Sadat 22 Italy: Prime Minister Giulio Andreotti 25 The Netherlands: Prime Minister Johannes Marten den Uyl 28 Commission of the European Communities: The Right Honorable Roy Jenkins, President; His Excellency Fernand Spaak, Head of the Delegation North Atlantic Treaty Organization: Secretary General Joseph M. A. H. Luns 34 Corporate Section: What International Corporations Expect of Foreign Governments Fiat Perspective: Global Vision of Development Giovanni Agnelli Nestle Objective: Assisting Developing Countries Arthur Fbrer Newsweek Priority: Free International Flow of Information Robert D. Campbell Wllluen: nnee[mg mutual expectations Donald E. Stingel Xerox Goal: Establishing Long-Term Relationships C. Peter McColough CO-EDITORS: Prof. Edward C. Bursk, Honorary Editor, Harvard Business Review Gene E. Bradley, President, IMDI ASSOCIATE EDITOR: Barbara F. Russell MANAGING EDITOR: Jacqueline A. Keith ASSISTANT EDITOR: Kathleen L. Graham ART DIRECTOR: C.J. Hepburn ? 1977 International Management and Development institute 2600 Virginia Avenue, N.W., Suite 905, Washington, D.C. 20037 Telephone: (202) 337-1022. Telex: IMDI 248698 DI Approved For Release 2004/03/16 : CIA-RDP80M00165AO02500040027-5 Approved Release 2004/03/16 : CIA-RDP80AaQ 6565A002500040027-5 What Governments Expect of Foreign International Corporations- and What International Corporations Expect of Foreign Governments This Top Management Report brings together policy statements by Chiefs of State, Heads of Government and corporate Chief Executive Officers (CEOs), set- ting forth their views on how government and busi- ness, can work more closely together in ad- vancing our common interests and meeting the needs of society. Included in this "forum-in-print" are messages by the chief executives of NATO and the EC Commission. The idea for this issue is drawn from an earlier Top Management Report, in which we published our inter- view with His Imperial Majesty Mohammad Reza Pahlavi, Shah of Iran, on "Government-Business Co- operation in Iran's Socioeconomic Revolution." The response was so favorable that it was decided to de- vote an entire Report to a series of discussions with government leaders around the world, and to combine them with statements by leading corporate execu- tives. To develop the theme of government-business co- operation in the world community, Gene and Terry Bradley, as co-founders of IMDI, conducted the re- search and the interviews with government leaders from other nations-personally seeking their views on these four points: 1. Their policies toward foreign trade, Investment, Joint' ventures, and other commercial ventures-and whatthey expect from It. 2. Examples of success (through technology trans- fer, stimulus to economy, taxes received, exports generated, management acquired, etc.). 3. Growth areas and opportunities where Interne- tionai corporations are especially welcome. 4. Terms of the contract, such as codes, laws, liml- tations, corporate citizenship, expectations from the corporations. In parallel, and to balance the views of the govern- mental leaders, we invited the chief executives of five major multinational corporations to address the fol- lowing four points: 1. Reasons for investing their necessarily limited resources In countries overseas. 2. Factors contributing to a favorable investment climate. 3. An inventory of the tangible benefits they have brought to host communities. 4. A statement of their own corporate codes and what they feel they must expect from host govern- ments. Response to our invitations for guest statements was outstanding. Cooperation-beginning here in Washington, D.C., and extending to the governments of Mexico, Japan, Indonesia, Australia, Egypt, Italy, and the Netherlands, plus NATO, the European Com- munity and corporate headquarters in the United States, Italy and Switzerland-surpassed the finest of cooperation we can recall in our publishing experi- ence. We are honored to introduce this global- community "forum-in-print" with an introductory message from America's own Chief of State, President Jimmy Carter. Following are highlights of discussions which Gene and Terry Bradley conducted overseas. Highlights of Discussions Summarizing a nine-nation series of discussions is a difficult job, especially in just a few pages. We were privileged to meet not only with the guest authors whom we interviewed or from whom we obtained policy statements. In addition, we exchanged views with several score others-representatives from both the host governments and American embassies; from American business and multinational companies headquartered in the countries we visited; from ,in- ternational organizations (International Chamber, GATT, ILO, UNESCO, OECD); and from academia. In all, it was a magnificent experience-encouraging, enlightening, sobering, even in some areas (such as Eurocommunism) somewhat frightening, but in bal- ance, overwhelmingly on the encouraging side. Impressions on the political climate for international business Speaking from the vantage point of the American observer, we would report a substantial improvement in the business climate for American business com- pared to even a few years ago. (Compared with a de- Approved For Release 2004/03/16 : CIA-RDP80M00165A002500040027-5 Approved For Release 2004/03/16 : CIA-RDP80M00165A0 02500040027-5 G de ago, the change has been remarkable. We recall th sharp pronouncements at that time by Jean- J cques Servan-Schreiber, who warned the world to and against "The American Challenge" and Ameri- cain "corporate imperialism.") Today, if there is any single theme in the countries we visited, it is, perhaps, ankee, stay here. Don't dis-invest. Don't fire em- yees, or 'export jobs,"' The sluggish state of the world economy, coupled with growing uncertainties o er the recovery itself, has contributed to the desire b host governments for U.S. investments-even as U.S. companies grow less enchanted with the idea of increasing their overseas investments. The change is equally profound-compared to a d cade ago-in the minds of American entrepreneurs d ing business in sensitive overseas environments. E onomically, intellectually, emotionally, they are part aid parcel of the host environment. Ned for United States in tiatives In international economic affairs gain and again, around the rim of Asia, through th Middle East, into the heart of industrialized Europe, a rd then into Latin America, we heard the same th me: "We need, want and welcome American initia- tives, for only America has the political will, industrial strength, management, technology, and money to get th world economy moving." Our friends cautioned th t they do not need or want an arrogant or domi- n ering America; but they truly want our Initiatives- or a self-respecting basis. In balance, our foreign friends like what they see of th new Administration. As one business leader ob- served, world reactions have gone through three p ases: ? First, wonderment, "Who is Jimmy Carter?" ? Second, approval-of the first round of high-level appointees. ? Third, concern mixed with hope as to what policies President Carter will actually adopt that will affect their future. The "hope" seems to outweigh the concerns at this early stage. They want to believe in a fair, free liberal trade and investment world community, spearheaded b the U.S. Government (both Administration and Congress). But one senses that America is under a m croscope; and that any major faltering, lack of con- fi ence, or backsliding on our part might well be mag- ni led out of proportion by our friends overseas, with a verse economic and commercial consequences for al concerned. It would not be difficult-it would be all to easy-for protectionist forces to get out of hand a d to trigger the trade-and-economic battles that n ne of us want. Nationalism versus internationalism in the world marketplace Nationalism is by no means dead, either in Washing- ton or in overseas capitals. But fortunately, it is more passive than active for the time being. It is obvious to other countries that U.S. foreign in- vestments are not surging ahead at the rate our for- eign friends might like-in Indonesia, Australia, Egypt, or anywhere we visited. Americans are exercising cau- tion for a variety of reasons. For example: how can a new investor in Indonesia know that the "oil experience" will not be repeated in other fields? (Yet U.S. rubber company executives will tell you that their experience in Indonesia has been very good-among the best in the world.) How can an investor in Australia know how success- ful Prime Minister Fraser will be in winning his battle against soaring wages and inflation? (It is evident that the Prime Minister is fighting valiantly and intends to win.) How can an investor in Egypt work around the many obstacles, including horrendous bottlenecks and po- litical uncertainties? (Yet, one can see clear, early signs of progress. As Allis-Chalmers CEO David C. Scott reported in his capacity as Chairman of the U.S. Section of the Egypt-U.S. Business Council, "There are many persuasive reasons for U.S. companies to invest in Egypt.") If one had to reach a single generalization, it would be this: more and more nations are now recognizing they must do a better job in competing for foreign investments and be prepared for truly competitive negotiating. The' immediate task, it seems to us, is for America to encourage this trend through imaginative initiatives and strong negotiating. The mounting importance of improving working relationships with labor IMDI's priority has always been to bring government and business leaders together for the purpose of ex- changing views on issues of major common interest, in fulfillment of our own mission, which is "to build closer bonds of unity among men and nations through better management practices and international co- operation." While we have not excluded labor, neither has it been in the central stream of IMDI's plans and pro- grams. This trip brought home the explosiveness of the labor issue-especially in the minds of European af- filiates of U.S. companies. In The Hague, the issue seemed of overriding importance. Rather than cite statistics, we shall refer to just one example, the case of the corporate president who felt Approved For Release 2004/03/16 : CIA-RDP80M00165A002500040027-5 Approve'l.F,ar'Release 2004/03/16: CIA-RDP8015A002500040027-5 he had to dismiss a "troublemaker," but could not be- cause of labor policies and pressures. So the CEO, knowing that a firing was impossible, instructed the man simply to sit at home and receive full pay for do- ing nothing for the next three years until his retire- ment. So it happened. But the union said, Not so. You deprived this man of his right to work. Therefore, in addition, give him a cash settlement"-which the CEO was compelled to do. On the positive side, we witnessed heartening exam- pies of major corporations making outstanding use of "work councils" to build employee understanding on corporate goals and the need for being competitive and earning profits. It is a mixed bag, alarming and encouraging-an issue obviously demanding mount- ing corporate attention. "Corporate credibility" now a very major international priority Here in the United States, corporate top manage- ment is keenly aware that "corporate credibility" has become a serious issue. In last year's Conference Board report of critical issues, CEOs rated as their number one concern "growing distrust on the part of the general public." Our sampling of overseas top management concerns was selective, not exhaustive. But again and again, the response was similar; multi- national corporations of all nations (not just of the United States), are under suspicion, often attack; they are not credited by the public (including government and labor) for their positive contributions to the com- munities in which they do business. Here are several representative judgments: ? From a high U.S. Government official in Europe- Demonstrating and documenting "corporate social responsibility" should have highest priority, es- pecially in France. Explaining the facts about busi- ness is a necessary response to the increasing strength of Eurocommunism, and the damaging publicity currently facing the multinational. There is a definite bias against MNCs. ? From a Swiss corporate CEO-In response to nu- merous misconceptions surrounding MNCs, it is important to focus on the positive role of the multi- nationals, especially in the context of the "North- South Dialogue." ? From an Italian corporate CEO-We need recogni- tion for companies as corporate citizens. And for our part, within companies, we need acceptance of codes for a "clean MNC." ? From a French corporate CEO-Recognition by European managers that business is in jeopardy is a relatively new phenomenon. But CEOs are now alert. They are concerned and want to take con- structive action to handle the problem with "under- standing." Growth of Eurocommunism and the need for affirmative business response The likelihood that the French Communists may, within a year, be "helping" to govern France was viewed with apprehension wherever we went. While we were in Europe, business executives from the Patronat Francais met with the leadership of the Communist Party, a meeting which degenerated into a shouting match as the Communists defined their goals vis-a-vis business once the Communists had won in the elec- tions. What business and government leaders expressed to us were the stakes. At stake, in the long run, is not just profitability. At stake is the private enterprise system-or, if you will, the "mixed economy" in which private business works in harmony with government on such common objectives as R&D, production, eco- nomic growth, job creation, and attainment of national objectives. True or false, there is mounting belief that our pres- ent economic system is not meeting the basic needs of middle- and lower-income families whose modest standards of living have been seriously eroded by the ravages of inflation. "Business credibility" plummets as the promises of Eurocommunism grow bolder and more eloquent. Therefore, this conclusion: CEOs are in the very forefront of the battle of social systems. And "cor- porate credibility"-or the lack of it-is becoming an unavoidable issue. The impressions summarized above reflect the challenges facing government and business as they strive to meet the needs of an increasingly interde- pendent world. How to come to grips with these gov- ernment-business concerns is a subject to be ad- dressed in this and future Top Management Reports. 0 Gene E. Bradley SEPTEMBER 1977 Approved For Release 2004/03/16 : CIA-RDP80M00165AO02500040027-5 3 Approved For Release 2004/03/16: CIA-RDP80M00165AQ02&00040027-5 epartment of Slate Plibtograph With President and Mrs. Lopez Portillo This Top Management Report pre- sents the views of Chiefs of State, Heads of Government and leaders of international organizations. Those who have already met with President Carter are pictured on this page. om the President of the United States . With EC Commission President Jenkins Europe?ban Communrt Information Service With Prime Minister Fukuda 4 Approved For Release 2004/03/16 : CIA-RDP80M00165AO02500040027-5 Approved For Release 2904/03/16: CIA-RDP80M00165A00&58940027-5 Foreign International Corporations What Governments Expect of a MEM t MEXICO President Jose Lopez Portillo JAPAN Prime Minister Takeo Fukuda REPUBLIC OF INDONESIA President Suharto AUSTRALIA Prime Minister John Malcolm Fraser ARAB REPUBLIC OF EGYPT President Anwar El-Sadat ITALY Prime Minister Giulio Andreotti THE NETHERLANDS Prime Minister Johannes Marten den Uyl COMMISSION OF THE EUROPEAN COMMUNITIES Roy Jenkins, President; Fernand Spaak, Head of the Delegation -NATO Secretary General Joseph M.A.H. Luns Approved For Release 2004/03/16 CIA-RDP80M00165A00= 5000 ?027- GOVERNMENT SECTIQN: 32 ~ ,. ^016,, July 7, 1977 People everywhere are increasingly aware that all economies are becoming more and more inter- dependent in terms of available resources and isirkets. As a sovereign nation and as a member of the world cor.ununi ty, the United States gladly shares with others the opportunities that exist For all, and in turn welcomes their support in resolving common economic problems. The most urgent need at present, both at home and abroad, is to create jobs without stimu- 1.atinq inf1atior so that the improvement in the world economic situation which began in 1975 may continue. The greater share of the burden involved in achieving this objective will fall on the in-- dustriala sped nations and on international corporations. They have proved successful in disseminating the technical and managerial skills on which we most depend if the expectations of twentieth century mankind are to be fulfilled. Et- =, with this in mind that I commend the valuable contri hution made by the International.. Management and Development Institute and the editors and staff of Top Management Report in providing ding such a useful forum from which both rat ons and businesses can benefit. (L-.e zC_ Approved For Release 2004/03/16 CIA-R?P80M00165A002500040027-5 Approved For Release 2004/0341~E q9 Q1 i5A002500040027-5 WASHINGTON July 7, 1977 People everywhere are increasingly aware that all economies are becoming more and more inter- dependent in terms of available resources and markets. As a sovereign nation and as a member of the world community, the United States gladly shares with others the opportunities that exist for all, and in turn welcomes their support in resolving common economic' problems. The most urgent need at present, both at home and abroad, is to create jobs without stimu- lating inflation so that the improvement in the world economic situation which began in 1975 may continue. The greater share of the burden involved in achieving this objective will fall on the in- dustrialized nations and on international corporations. They have proved successful in disseminating the technical and managerial skills on which we must depend if the expectations of twentieth century mankind.are to be fulfilled. It is with this in mind that I commend the valuable contribution made by the International Management and Development Institute and the editors and staff of Top Management Report in providing such a useful forum from which both nations and businesses can benefit. 0' 74" Approved For Release"'03/`1*80 0165 002500040027-5 IN ,., "roved,For Release 2004/03/16: CIA-RDP80M00165AO02500040027-5 M H.E. Jose Lopez Portillo, President In the personal interview which follows, Mexico's President, Jose Lopez Portillo, speaks with convic- tion and foresight about his Administration's efforts toward strengthening the Mexican economy and becoming more attractive to foreign investment. Highlights: ? President Lopez Portillo is moving Mexico forward in a national effort to challenge unemployment and inflation and to respond to critical needs of his countrymen with a program called the Alli- ance for Production. ? Emphasis is being given to increasing domestic production-especially in the areas of food and energy-and to strengthening the country's export capability in such fields as agriculture, mining, chemicals and petrochemicals. ? Mexico's new approach to industrial development encourages foreign investment and continues to value the high technology, financing, jobs, education, and markets it provides. ? President Lopez Portillo welcomes companies which "respect the interests and sovereignty of the state in which they operate" and which respond to the social needs of the host country. r. President, to begin, may I note that published reports, along with conversations with American executives, have led me to understand that the climate for cooperation between your coun- try and the United States is most favorable. I have also received many favorable comments regarding your efforts to stabilize the economy and combat inflation. In this light, would you please briefly outline the mea- sures you are taking to strengthen Mexico's economy at this time? We have taken two kinds of mea- sures: some to maintain the structure of development and others to re- spond to critical needs. They are joined in a program that I have called the Alliance for Production. We have this age-old problem in Mexico: a population that has not satisfactorily received the funda- mental needs of life, and wealth that is not evenly distributed. This prob- lem is written throughout our history, and it explains all our social strug- JOSE LOPEZ PORTILLO, Mexico's Presi- dent, shown here in his interview with IMDI President Gene Bradley, served as Finance Minister in the Government be- fore his election to the Presidency in Sep- tember 1976. Trained as a lawyer and political scientist, President Lopez Portillo entered government service seventeen years ago and since then has held a variety of posts under different Adminis- trations. He brings to his position an ex- tensive academic background, which in- cludes teaching law and political science, as well as authoring several books and studies. gle. It has now become intermingled with the present economic situation which is characterized by an infla- tionary process and a growing bur- den of unemployment. This is the complex of issues that rests on top of the basic structural problem. Therefore, we are attempting a na- tional development program based on administrative, fiscal and political reform. We have established two basic pri- orities in this program: food and energy. We are designing and put- ting into effect a plan for food pro- duction which has already had some favorable results, not totally satisfac- tory, but with indications that we are on the right road. In energy resources we have had, on the contrary, great success. Just the other day I was informed that two very promising new oil fields have been discovered, one on land and one offshore, which gives us addi- tional assurance of our self-suffi- ciency in energy. These are the two large development priorities which I want to solve by increasing produc- tion, but of course without ignoring other economic and social programs. The feeling that I have received since arriving in Mexico, based upon discussions with corporate officers, is that even though the economy is stable-rather than growing-this year, the right measures are being taken now; and next year and the years beyond should show continu- ing upward improvement. Yes, we certainly hope so. Last August, we saw the need to abandon our position of a fixed exchange rate with the dollar because we were in an inflationary spiral which had to be solved through reliance on our political stability. The country was in this condition when I took office, and it was under these circumstances that we have had to take action. We know that it will take no less than two years to solve the basic problem, but we have already made progress in several Approved For Release-2004/03/16: CIA-RDP80M00165AOQ2?5,Q0040027-5 MEXICO IN BRIEF* LAND: 1,978 800 km2; 12% cropland, 40% pasture, 22% forested, 26% other (including waste, urban areas and public lands). POPULATION: 63,192 (January 1977), average annual growth rate 3.3% (current). LABOR FORCE: (1973): 15.7 million (defined as those 12 years of age and older); 39.5% agriculture, 16.7% manufacturing, 16.6% services, 16.8% construction, utilities, corn - merce, and transport, 3% govern - ment, 7.4% unspecified activities. GDP: $78.6 billion (1975), $1,350 per capita; 74% private consumption, 7% public consumption, 21% do- mestic investment (1974 est.); net foreign balance -2%; real growth rate 1975, 4% est.; real growth rate 1966-75, 6.3%. MAJOR INDUSTRIES: Processing of food, beverages, and tobacco; chemicals, basic metals and metal products, petroleum products, min- ing, textiles and clothing, and trans- port equipment. EXPORTS: $3.31 billion (f.o.b., 1975); cotton, coffee, nonferrous minerals (including lead and zinc), sugar, shrimp, petroleum, sulfur, salt, cattle and meat, fresh fruit and tomatoes. IMPORTS: $6.58 billion (c.i.f.; 1975); machinery, equipment, industrial vehicles, and intermediate goods. MAJOR TRADE PARTNERS. Ex- ports-60% US., 10% EC, 4% Japan (1975); imports-62% U.S., 17% EC, 5% Japan. The facts cited in this country brief and in those for Japan, Indonesia. Australia, Egypt, Italy, and the Netherlands are from the Na- tional Basic Intelligence Factbook (January 1977) published by the U.S. Government Print- ing Ciffice. areas, including achieving a substan- tial reduction in the deficit in our bal- ance of trade, and controlling infla- tion. The rate of increase in inflation is beginning to decline, but we have not yet been able to reduce it to the U.S. level. Since our economy is so closely linked to the American econ- omy, and as long as we are unable to control domestic inflation-or at least reduce it to the American rate -we cannot completely control the situation. We are working toward this goal. We are controlling and chan- nelling public expenditures following an agreement with the International Monetary Fund. We have adjusted the deficit of the public sector. We have established a limit to foreign financing, and we have limited the coining of new money to maintain harmony with the reserves of the Central Bank. We have also directed public expenditures into priority activities, principally the most pro- ductive. This, in the broadest of terms, is what we are doing and what is now beginning to produce results. What do you see as the contribu- tion of foreign private capital invest- ments in your economy? I consider it as a substantial part of our development process. We have often said that we need the technology, the financing and the markets foreign investments have to offer. We have resources-human as well as material. We have an internal market and the potential for growth. If we can establish-and they already exist-the operational bases of a balanced and just relationship, we can concern ourselves with the need for a good business climate for everyone, with a businesslike atti- tude, but with fairness and justice. This we also are doing successfully. I would remind you that we have a mixed economy, in which it is possi- ble to arrive at a series of very in- teresting combinations in which we can bring together national as well as foreign businessmen with the state or with state-run companies. This guarantees everyone's best interest. We have a law that clarifies our relationship with foreign invest- ment; and, as I often say, this law is selective but not restrictive. I think that the field is open and the time is propitious. At this point, in the United States, corporate executives, who must jus- tify their investments to their share- holders, are being quite selective as to where they invest. What are you doing to attract foreign investments to Mexico in light of worldwide com- petition for scarce capital and tech- nology? I understand very well the caution on the part of foreign investors. What we offer in our country are very precise laws, political stability, usa- ble human resources, a domestic market that can support large as well as small-scale operations, and a legal and democratic system. This. I believe, should be enough. Are you satisfied with the pace and scale of foreign investment coming here, or would you like to see it accelerated; assuming, of course, it is in keeping with the necessary codes and regulations? We are not satisfied with the rate of investment. It is evident that we would like to stimulate more private investment on the part of Mexican citizens, as well as compatible for- eign investment that could help us, and to which we could also contrib- ute. Permit me to explain. The period through which the country is passing requires more rigorous analysis than in the past. When we have problems of monetary stability and domestic credit, it is understandable that the investor should want to think care- fully before investing, and this is the way it should be, because we want no failures. We are making every effort to im- prove conditions in our country so that Mexican investors-as well as foreign investors working in accor- dance with our laws-who are willing to share the risks with the country, take these risks with full awareness of what they are doing. We have ur- gent needs, but we do not want to be hasty. As Napoleon said: "Dress me slowly because I am in a hurry." Very good. Could you define, Mr. President, some of these needs? I am assuming that the investments that you would like to attract are those that have high technology, that contribute to the creation of jobs, that produce low-cost but high-quality consumer goods, and that lend themselves to the training of national Mexican managers. Yes, and I would add to your list investments that would make it possible for us to export. More spe- Approved For Release 2004/03/16 : CIA-RDP80M00165AO02500040027-5 Approve& .eRelease 2004/03/16 : CIA-RDP80MQQ1A002500040027-5 cifically, technology and capital that would make use of our human and natural resources to strengthen the export capability of the country. Be- cause the industrial development approach followed by the country in the past has already exhausted its larger possibilities, it is no longer a growing source of employment. It was based on simple import substi- tution, and this has brought about a pattern of growth oriented toward a social class with consumption habits that do not permit an adequate ex- pansion of the market. We also run the risk that, with the phenomenon of inflation, profits are sought not by expanding the market, but by increasing prices, even to the extent of reducing the market. This is a mistaken growth pattern. That is why I agree with the idea of expand- ing the base of production in order to satisfy an ever larger internal mar- ket while opening up greater and greater export possibilities. What would be some of the basic fields or industries to which you give priority in your development? I would divide this into two parts. As far as the domestic market is con- cerned, we seek to introduce pro- ductive processes to satisfy basic needs which, under the present structure, are outside the reach of ti-,e masses of population. That is why, on many occasions, we have said that one of the basic problems of this country is that we have not been able to convert real needs into real demands. This is the basic prob- lem of the domestic economy. Insofar as industrial development is concerned, we have to integrate vertically because our growth, based on indiscriminate import substitu- tion, made us neglect basic aspects of our industry. We lack heavy in- dustry in satisfactory amounts. We also lack a machine tool industry. We have a growing steel industry, which was neglected and to which we are now giving priority. As far as our possibilities to pro- duce for export abroad are con- cerned, we have a large range of agricultural products that we still export as raw materials. I am refer- ring to cotton, to coffee, and in the past to sugar, which we do not now export. We have many vegetables, yet we do not have a satisfactory agro-industry which we could foster. We could say the same thing about Approved For Release 2004/03/16 : CIA-RDP80M00165AO02500040027-5 mining. Basically, we export raw ma- terials. We have also begun to export some manufactured products, but there is an enormous range of possi- bilities, as there also is in the chemi- cal and petrochemical areas. There are many fields in which we could use industrial processes point- ed toward exports-cement, for in- stance. In small, medium and large industry there are enormous possi- bilities. In most of these that you have mentioned, would you welcome the help of American partners in filling these gaps? We do have some now, and we would like to have more, of course. I would like, Mr. President, to move into another dimension of in- dustrial life, under the heading of corporate citizenship. Increasingly over the last ten years, chief execu- tive officers of U.S. corporations have recognized that they must go well beyond the basic function of creating goods and services. That is important. I have learned that a number of American companies have been working with your officials and with local communities in education, management training and social in- volvement. I would like to say a word or two on these companies' activi- ties. For example, Ford Motor Com- pany, with the Ministry of Education, and with the local communities,,has jointly helped to build over 100 schools. Union Carbide has donated a fully-equipped workshop to be used in the State of Mexico, and It has also instituted a pollution con- trol program. Singer Mexicana trains more than 500 public schoolteachers a year in the use of sewing and knit- ting machines. Chrysler donates motors, transmissions and automo- tive parts to technical schools. And recently I learned from the President of Colgate-Palmolive, Sr. Rudoph Perez, that his company has been working with the Department of Physical Education and Televisa in sponsoring weekly track events en- titled "Stars of Tomorrow" with 37,000 participants. Mr. President, it seems to me that the corporation has an enormous opportunity for education, management training and social involvement. Do you welcome this kind of activity? Of course. I believe that this is the real meaning of modern enterprise- it understands contemporary prob- lems and, in so doing, promotes this attitude which gives social meaning to business. Increasingly these com- panies leave behind the mercantilist spirit by carrying out what we under- stand to be the social function of wealth. Beyond the company is the society that allows it to do busi- ness; and the healthier the society, the better off business will be. Un- derstanding this is to understand the future and to adapt one's self and the world to the needs of a future where social meaning will be ever more necessary if we want to pre- serve peace. Mr. President, multinational cor- porations are being viewed today from many vantage points, some positive, some negative. One view is that the multinational is a transmit- ter of values and ideas between na- tions. What is your opinion? I think that this concept is very interesting, and I believe it stems from what is for me a very important understanding. National solutions have become less adequate every day. And we must begin to think of alternative ways of uniting the dif- ferent interests in order to state the problems more clearly and solve them more adequately. Anything that makes progress toward understand- ing, cooperation and respect seems to me to be in the right direction, and in this effort there should be no bor- ders between states nor between corporations. Anyone who can ad- vance the cause; of understanding and cooperation must do so. Turning to the subject of U.S.- Mexican relations, has there been any change in U.S. policy toward Mexico, or in Mexican policy toward the United States, since the recent change In the presidencies of both countries? Yes, a fundamental change. I had the great pleasure and honor of meeting with Mr. Carter. I was honored to be the first foreign Head of State to visit Washington in the Carter Administration, and the re- sults of that meeting were extremely important for us. We were able to discuss our problems. Following an agenda agreed upon by Mr. Carter and myself, a high-level working group-at the Secretariat level-will discuss these problems in order to find solutions. Several groups were formed just Approved For RQJWe 2004/03/16 : CIA-RDP80M00169fot692b00040027-5 recently, some to study so-called political problems on the level of Ministries of Foreign Relations- problems of border delimitation and problems of water. Another group is studying problems which we have labelled social: basically drug traf- ficking and the movement of un- documented workers. Still another group will study economic problems: fundamentally trade, finances, tour- ism, energy, and foreign investment -understanding that all of these problems are part of one package. There are no isolated problems; everything is part of everything else. If, for example, we want to solve the problem of undocumented work- ers, we must understand that the problem lies in Mexico's economic situation. This will improve if we achieve a better balance in our very unfavorable trade relations with the United States. To the extent that the United States buys more of what we have to offer, we can provide work for Mexicans in Mexico. Many will then not feel the necessity of going to the United States to look for work which they cannot find here and could have, if we could sell your country more of our products. This issue was very well understood be- tween us and the atmosphere for co- operation is excellent. Recently I met with the Congressional delega- tion that came to the XVII Interparlia- mentary meeting and the same spirit prevailed in our meeting. I sense a substantial change in at- titude, in comprehension and in un- derstanding, and I can say that I felt the personal friendship of Mr. Carter. We'could feel this sense of friend- ship from the newspaper accounts. Along these same lines, do you have any comments in general regarding U.S. policy toward Latin America? Is there anything specific that you would like to see? Well, we had the opportunity to talk with Mr. Carter about this, be- cause he was very open with us. We not only discussed issues relating to Mexico. Indeed, we emphasized to him that Mexico is representative of what is happening in Latin America. We told him that we had the im- pression that in the past the United States felt it had only two problems in Latin America: Panama and Cuba. But there were and are many more problems. No. 1 is the trade problem, which is heightened in the case of Mexico by our geographic proximity, but which exists in all the countries of Latin America. There exists an en- during mixture of trade, financial and monetary problems which demands a coherent U.S. policy toward Latin America. We recognize, on our part, that there has been no Latin American policy with respect to the United States and, what is even worse, no Latin American policy with respect to ourselves, the Latin American na- tions. And there is a need to bring order to this region as a contribution to world order, since it is a very clear example of the relationship between a rich and powerful country-the most powerful in the world-and the developing countries. We even dared to say before the U.S. Congress that it must be wonderful to be pow- erful, but that it was a great respon- sibility also. My final question, Mr. President, relates to the subject of understand- ing the value of foreign investments. In the United States and in many countries, there is great misconcep-. tion of the role of the multinational corporations and what they can do to stimulate growth, exports, jobs, and the quality of life. I think that is unfortunate. I have seen the figures-that the American Chamber of Commerce gave me-for what foreign invest- ment has done in Mexico: that 72 percent of the profits are reinvested, that 99 percent of the employees are Mexican, that 74 percent of the senior executives are Mexican, that exports have been increased 300 percent between 1970 and 1974, and that there is a great deal of research and development. But these facts do not seem to be well-known-in the United States or in other countries. Do you have thoughts as to what can be done to promote better understanding of the role of world trade and investment? This is a matter of the greatest in- terest to me, and I would link it with some of my previous comments. It is evident that the world daily is be- coming more itterdependent. It is impossible even to conceive of a country which is totally and com- pletely self-sufficient-not even the United States. Therefore, there is a need for trade between countries. Within this context, and in order to fill these needs, the multinational or transnational companies have de- veloped-combining capital, tech- nology and sales at levels that were barely imaginable previously. Some of these companies respect the interests and the sovereignty of the state in which they operate; and they exemplify,the positive practices that you have mentioned. But there are others which I would call homeless, faceless. They belong to no nation, respect no sovereignty and care only for their own interests, which are no longer rooted in any nation. They act only according to their own selfishness and in pursuit of their own concerns. They have no respect for national interests. For instance, if a corporation of this kind is attempting to develop a resource in one nation, and then finds that another nation offers better condi- tions, it will delay the development of the first resource in order to bet- ter exploit the second. It may even abandon the first country entirely, or else adjust its accounting in order to optimize its fiscal position. Thus many countries are deprived of con- tributions to their development with the benefit going only to the transna- tional company; I can cite numerous examples like this. For this reason, we think that there is need to establish, within the inter- national economic order, the obliga- tions of these companies to respect the rights of the weak, who are also human beings with needs, with fami- lies and with ideals, and who also suffer. Here I could repeat Shylock's words: If they are hurt, they bleed." Are you optimistic that we are moving toward the kind of economic order and partnership that we need? Is more good happening than bad? I feel that progress is being made. At least it is possible to discuss the problems in the appropriate forums. At this time there are meetings in which, at least, we are listening to each other and discussing problems. Progress is being made, perhaps not with the speed that we, the poor, would like, but we are moving ahead. I feel that the Carter Administration is very much aware of this situation and is trying to move in the right direction. ^ 10 Approved For Release 2004/03/16 : CIA-RDP80M00165AO02500040027-5 App pro s 0 /16 : CIA-RDP80QW5A002500040027-5 H.E. Takeo Fukuda, Prime Minister Prime Minister Fukuda, emphasizing the substantial contributions of international enterprises to to- day's global economy, gives his thoughts on the type of relationship that is most desirable between host countries and international corporations. Major comments: ? By enhancing the international flow of technology, capital and know-how, international enter- prises have helped to promote increased understanding among nations. ? Japan's own experience has indicated that development can best be secured under an open eco- nomic system. ? Among the problems requiring the cooperative efforts of governments and corporations are ir- regular business practices and inequitable host nationalization procedures. ? The world will witness ever closer consultation among nations in promoting the positive contri- butions of international corporations. 13 y way of introduction, Mr. Prime Minister, what are your thoughts on cooperation be- tween international enterprises and host countries? Since the advent of the 1970's, the world economy has been confronted with a series of difficulties as typified by the oil crisis, followed by both re- cession and inflation. Consequently, the world economic environment is now undergoing major structural changes. In an effort to cope effec- tively with such changes, the nations o'f the world are promoting close consultation and cooperation with each other through various interna- tional forums. Behind this is a com- rnon awareness that, in the world to- day, no nation can hope to live alone and attain economic prosperity- without mutual help and the sharing of responsibilities for the world Japan's Prime Minister since December 1976, TAKEO FUKUDA is known as his country's "Master of Economic Affairs." He has served in six cabinet posts includ- ing Deputy Prime Minister, Finance Minis- ter, Foreign Minister, and Director General cif the Economic Planning Agency. He has also been Japan's official representa- tive at international economic confer- ences held by the IMF, the World Bank, the Asian Development Bank, and the Joint Japan-U.S. Committee on Trade and Economic Affairs economy. Thus, the international economic relationship is today marked by a growing interdependence. The de- gree of this interdependence is steadily deepening in all aspects, in- cluding international trade, finance, transportation, and tourism. Any ef- fort to resolve the current problems of the world economy cannot afford to ignore this fact. Our past experiences clearly indi- cate that the development and pros- perity of the increasingly interdepen- dent world economy can best be se- cured under an open economic sys- tem that guarantees free trade and free capital movement. And it may be said that business enterprises which are engaged in international opera- tions in trade, investment and other fields have played no small part in advancing the economic interchange among the nations of the world. Above all, direct investments by such enterprises, involving the direct transfer of comprehensive business operations, including technology, capital and managerial know-how, have made a significant contribution to the stable development of both the host countries' economies and the world economy as a whole- through the appropriate allocation of resources. Accordingly, I believe such international direct investments are a factor truly conducive to the harmonious development of rela- tions among nations. On the other hand, it is said that the activities of international enter- prises, because of their very magni- tude, tend to go beyond the bounds of national control and have become so powerful that they may even at times influence national policies. As a result, their activities sometimes tend to generate friction between their host countries and themselves. Since the relationship between in- ternational enterprises and host countries has two aspects-that is, mutual benefit and friction-it be- comes essential for both sides to ac- knowledge their common interests and, at the same time, to try to elimi- nate frictions that could arise be- tween them. Furthermore, I believe it important for the governments and the private sectors concerned to co- operate in tackling these problems, bearing in mind the need to keep the long-range point of view instead of pursuing short-term benefits alone. Moving into what type of coopera- tion is most desirable, could you please discuss what host countries should expect from international en- terprises doing business in their country? All host countries hope that the ad- mission of international enterprises, including their capital, technology and managerial know-how, will en- hance the economic well-being of the host countries through bringing about increased employment oppor- tunity, elevation of technical stan- dards, and acceleration of the pro- cess of industrialization. In the case of developing coun- tries, since they are deficient in the capital, technology and managerial know-how which are indispensable for their economic development, private direct investment has a sig- nificant role to play in making up for such deficiencies. Much is expected of international enterprises in this regard in the years ahead. The introduction of foreign capital in Japan after the end of World War II played a significant role in the postwar reconstruction of the Japa- nese economy. In view of such an experience, we have been striving to Approved For Release 2004/03/16 : CIA-RDP80M00165AO02500040027-5 Approved For Release 2004/03/16 : CIA-RDP80M00165AO02500040027-5 JAPAN IN BRIEF LAND: 370,370 km2; 16% arable and cultivated, 3% grassland, 12% urban and waste, 69% forested; POPULATION: 113,462,000, includ - irrg Ryukyus (January 1977), average annual growth rate 1.1 % (current). LABOR FORCE: (1975 figures) 53.2 million; 12.7% agriculture, forestry, and fishing; 35.2% manufacturing, mining, and construction; 48.2% trade and services; 3.7% govern - ment, 1.9% unemployed; surplus of skilled labor, 2.0 million est. em- ployed (Jan. -Mar. 1975): GNP: $488 billion (1975, at 296.8 yen U.S.$1); $463 billion in 1974 prices, $4,400 per capita (1975); 57% per- sonal consumption, 32% investment, 11% government current expendi- ture; real growth rate 2.1% (1975); average annual growth rate 6.3% (1970-75). MAJOR INDUSTRIES: Metallurgical and engineering industries, electrical and electronic industries, textiles, chemicals. EXPORTS: $54.8 billion (f.o.b., 1975); 54% machinery and equipment, 22% metals and metal products, 7% tex- tiles. IMPORTS: $49.7 billion (f.o.b., 1975); 44% fossil fuels, 8% metals and metal products, 15% foodstuffs, 7% machinery and equipment. MAJOR TRADE PARTNERS: Ex- ports-20% U.S.; 15% OPEC, 11% Communist countries, 10% EC, 4% Australia, 40% other imports-35% OPEC, 20% U.S., 7% Australia, 6% EC, 5% Communist countries, 27% other. liberalize both the inflow and outflow of capital to the greatest extent pos- sible. At the same time, host countries expect that international enterprises will conform to the host countries' general economic policies with re- spect to trade, balance of payments, taxation, labor relations, and so forth. It may be noted, in this connection, that there is a growing clamor for the public disclosure of the financial conditions of international enter- prises in order to increase the trans- parency of their operations. Host countries further desire that international enterprises refrain from indulging in corrupt practices, such as illegal political donations and bribery, in their overseas operations. At present, international as well as national studies are under way to forestall such corrupt behavior and to 'facilitate normal transactions in international commerce. In the ap- pendix to the joint communique is- sued on May 8 at the end of the Lon- don Economic Summit Meeting, Japan joined the six other leading in- dustrialized countries of the world in welcoming "the work being done toward international agreements pro- hibiting illicit payments." With respect to these problems, it is noteworthy that a code of conduct on international enterprises is now under study in the United Nations, and that the Organization for Eco- nomic Cooperation and Develop- ment (OECD) has already adopted a set of guidelines. These circum- stances would seem to be a clear in- dication that the world expects inter- national enterprises to conform to a certain reasonable standard of con- duct in their operations. Recognizing that cooperation is a two-way relationship and responsi- bility, would you also give your views on what international enterprises should expect from host countries? Private enterprises are by nature interested in essentially free eco- nomic activities for pursuing their objectives. International enterprises are no exception, They entertain hopes for free access to foreign countries, for national treatment ac- corded with respect to their business operations, and for the assurance that just compensation will be paid in accordance with international law in the event of nationalization. In that connection, I wish to emphasize that in order to facilitate direct in- vestment, it is important to prepare an environment in the host countries conducive to such investment. Efforts have been made in this re- spect among the developed nations to eliminate barriers against the free- dom to invest in foreign countries in line with the OECD code of liberaliza- tion concerning the movement of capital. OECD member governments are also cooperating-as indicated in the OECD Declaration of June 1976-on the freedom of business activities in the host countries after the admission of enterprise, with a view to bringing about the mutual granting of equitable national treat- ment. However, the problem as to how similar freedom should be guar- anteed in the developing countries, which differ in the degree of eco- nomic development, is a matter for further study. The problem of nationalization, needless to say, has been one of the major issues in the North-South problem of recent-years. It is espe- cially important to provide ways and means to handle disputes in accor- dance with international law in case of nationalization, as a minimum pre- requisite for ensuring a stable and smooth flow of capital between na- tions. It is hoped that host countries will recognize this fully and take necessary measures to achieve this purpose. Be that as it may, it is ear- nestly hoped that further discussions on this question at the international level will produce constructive re- sults. In summary, what is the outlook for the future, as you see it? I believe that in the future the world will witness a further promotion of economic management through in- creasingly closer consultations among nations. As the world economy moves in that direction, the international activities of enterprises are expected to grow multifarious and multinational. Against this background, it is sin- cerely hoped that all the nations of the world will achieve ever closer co- operation in promoting the positive contributions of international enter- prises in various fields of economic interchange, including capital and technology, and thereby in bringing about the prosperity of their respec- tive domestic economies and of the world economy as a whole-while at the same time trying to eliminate the negative sides of their activities. Approved For Release 2004/03/16 : CIA-RDP80M00165AO02500040027-5 Approved For Release 2004/03/16 : CIA-RDP80M00165AO02500040027-5 In response to IMDI's questions, Indonesian President Suharto discusses his country's view of the role of foreign investment in achieving national objectives. In so doing, he: ? Analyzes the role of multinational corporations in assisting Indonesia fulfill its Second Five-Year Development Plan. ? Provides a list of priority sectors which are open to foreign investment and technical assistance. ? Describes as "highly useful" to Indonesia's economic growth investments in the industrial, agricul- tural and mining sectors. ? Emphasizes the hope that companies investing in Indonesia will work "to the best of their ability and in accordance with existing regulations." Mr. President, what is the policy in regard to foreign in- vestment in your country? At present, Indonesia is busily en- gaged in carrying out its Second Five-Year Development Plan, which focuses on economic development without neglecting other sectors. This requires a great amount of capital and skills. While still adhering to the principle that Indonesia's national development efforts are the respon- sibility of the Indonesian nation itself, we are open to the possibility of es- tablishing economic cooperation with foreign countries-either with gov- ernments or private sectors. It is in this respect that we provide oppor- tunities for foreign investment in sectors we ourselves have not been able to undertake. PRESIDENT SUHARTO of the Republic of Indonesia assumed his position by decree of the People's Congress in 1967. Until this time, he pursued a career in the Army, working in earlier years for Indonesian in- dependence and in later years for the restoration of security and order within his country. Before his election as Presi- dent, he served as Minister/Commander- in-Chief of the Army. Under our foreign investment laws, the rights of foreign investors are protected. Attractive incentives are given-such as tax and duty prefer- ence, transfer of profits and depre- ciation-thereby enabling investors to gain reasonable profits. Both foreign and domestic inves- tors receive the assistance and sup- port of the Government. The Govern- ment restricts or imposes high tariffs on goods which are already being sufficiently produced domestically- whether by foreign or domestic in- vestors. National production is protected by better defined regulations on vari- ous sectors which are still open, limited or closed to either foreign and/or domestic investment. We have formulated a "Scale of Priority List," which is revised from time to time in order to remain compatible with the national interest. What do you see as the principal benefits of foreign investment in your economy? As I mentioned earlier, we are in- viting foreign capital investment in order to complement and to acceler- ate the implementation of develop- ment plans. Development efforts require capital, technology and ex- pertise, which are scarce or lacking. We hope foreign investors will help us not only to exploit our natural resources-in turn benefitting our economy by the increase of income and foreign exchange and the crea- tion of job opportunities-but also to enhance our ability to use modern technology, managerial skills and capital. We have made encouraging progress during the past few years with the involvement of foreign in- vestment. What, in your view, are the princi- pal problems or issues relating to foreign investment in your country? We have not yet encountered any major difficulties relating to multi- national corporations operating in this country. The principle of sover- eignty in the domain of foreign capi- tal investment (as set forth in the U.N. "Declaration on the Establish- ment of a New International Eco- nomic Order"), has always guided our policy. In the Foreign Investment Law and its bylaws we have stipu- lated safeguards and controls on foreign investment. Nevertheless, we constantly over- see the implementation of defined policy to ensure the attainment of our national development goals. We have learned a valuable lesson from the experience of other countries which have faced difficulties caused by multinational corporations. The Government hopes that foreign com- panies that are already investing or are intending to invest in Indonesia will work to the best of their ability in accordance with obligations imposed on them by existing regulations, and will always remember that any action that creates a negative effect on the economic, social and political situ- ation in Indonesia will certainly be detrimental to their companies. What is your policy with regard to the various forms of investments: e.g., equity ownership, licensing ar- rangements, joint ventures? The basic Government policy on equity ownership is that, in any ven- ture, there must be the possibility of increasing national ownership over time until Indonesia becomes a ma- jor shareholder. Where capital is not lacking, but 13 Approved For Release 2004/03/16 : CIA-RDP80M00165AO02500040027-5 Approved For Release 2004/03/16: CIA-RDP80M0016 500040027-5 INDONESIA IN BRIEF LANID: 1,906,240 km2;. 12% small holdings and estates, 64% forests, 24% inland water, waste, urban, and other. POPULATION: 135,913,000, includ- ing Portuguese Timor and West Irian (January 1977), average annual growth rate 2.4% (current). LABOR FORCE: 44 million; 70% agriculture, 15% industry, 15% mis- cellaneous and unemployed. GNP $29 billion .(1975, current prices), about $220 per capita; real average annual growth 7.1% (1970- 75). MAJOR INDUSTRIES: Processing agricultural products and petroleum, textiles, mining. EXPORTS: $6.8 billion (f.o.b 1975); timber, rubber, tin, copra, tea, coffee, tobacco, palm oil; petroleum, $5.1 billion (405 million bbls) (1975). IMPORTS: $5 billion (c.i.t, 1975); rice, other foodstuffs, textiles, chemi- cals, iron and steel products, ma - chinery, transport equipment, con- sumer durables. MAJOR TRADE PARTNERS: (1975) exports-32% U.S., 44% Japan, 9% Singapore; imports-18% U. S., 41% Japan, 9% West Germany, 6% Singapore. technology is, licensing arrange- ments with foreign companies for technical assistance are possible. The Government also hopes that the opportunity to own shares is as widely available as possible to the general public, through the recently established securities and stock ex- change market. Companies which sell their shares in the securities mar- ket enjoy certain preferences and benefits. The main purpose of this venture is to spread evenly equity ownership and to increase public income, in addition to drawing and productively using the potential capi- tal of the society. We offer production-sharing con- tracts for enterprises requiring a great deal of capital and advanced technology, such as mining and crude oil. We hope that through these production-sharing contracts we can, when the time comes, also use the most up-to-date technology, as well as receive a share of the pro- duction. Are there particular areas or sec- tors of the economy in which invest- ment by multinational companies are particularly welcome? The Scale of Priority List divides economic sectors into four cate- gories: those open and given top priority; those open and provided with facilities; those open but without the facilities; and those closed to for- eign capital investment. In general, I can say that those sectors open to foreign capital in- vestment are as follows: ? Sectors producing raw materials from natural resources; or those producing basic materials, semi- finished goods or components for diverse industries; ? Sectors manufacturing finished goods generally requiring a higher degree of technical know-how, expertise and capital than in the initial production stage; ? Sectors producing export goods; ? Sectors requiring more capital, higher technological skills and expertise (and involving greater risks) than domestic capabilities can provide; ? Sectors providing greater em- ployment opportunities and stim- ulating the expansion of capital investment in areas outside Java. It is evident, therefore, that the op- portunities for foreign investment are numerous. These same opportuni- ties are also open to multinational companies, since there are no laws in Indonesia that make the distinc- tion between the so-called "multi- national" companies and other for- eign companies. What are the terms on which mul- tinational companies are expected to operate in your country? Indonesia's foreign investment policy is stipulated in the Foreign Capital Investment Law. Its rules ap- ply to sectors that are open to for- eign capital-covering equity owner- ship (including among other rules, the obligation to involve domestic capital); employment of foreign ex- perts; and the timeframe for invest- ment (maximum 30 years). Generally speaking, we ask foreign corporations to have a sense of re- sponsibility toward the Indonesian nation and people. We hope that for- eign investors can adapt to the ob- jectives of Indonesian development endeavors-namely, to build up In- donesian economic and business capability with the end result being national self-reliance and self-suffi- ciency. Can you give an example of for- eign investments that have been particularly successful from the point of view of your country? In principle, every approved for- eign investor must yield beneficial results to the Indonesian state and people. Capital investment in oil is one example of a successful and mutually beneficial cooperation. In general, it can be said that foreign investment in the industrial, agricul- tural and mining sectors has been highly useful to the growth of In- donesia's national economy. "In principle, every approved foreign investor must yield beneficial results to the Indonesian state and people." 14 Approved For Release 2004/03/16 : CIA-RDP80M00165AO02500040027-5 EN U Ooveg6gwar - AUUI UUU4UUL/-a T.R.H. John Malcolm Fraser, Prime Minister In this interview-conducted on March 31, 1977-Prime Minister Fraser describes Australia's progress in establishing a stabilized national economy and achieving a competitive role in interna- tional investment. The following are his observations: ? Australia's successes in combating recession and controlling inflation are causes for greater con- fidence in Australia's investment climate. ? A basic desire to develop major resources and to serve the national interest underlies the practice of flexible foreign investment laws. ? The decrease in labor unrest has contributed to restoring world confidence in Australia's mining and manufacturing industries. ? When setting national development objectives, it is necessary to consider what is economically feasible. M r. Prime Minister, in prepar- ing for this interview we were impressed by the uniqueness of Australia's situation. Since you possess a high degree of develop- ment and at the same time an enor- mous potential for further develop- ment, you can speak for both the de- veloped and the developing worlds. With this in mind we would like to ask you to define your own priorities in terms of economic development and your own overall aspirations for your country. In broad terms the priorities are very easily defined, but realizing them involves a complex of policies. Our first, shorter-term priority is to overcome the current economic re- cession, which in Australia's case, I believe, is caused more by our own folly than by world events. We were not as much affected by the oil situ- ation, for example, as many other countries, because of our own sup- plies. However, at one point, our Gov- ernment expenditures went up 46 JOHN MALCOLM FRASER has held the post of Prime Minister of Australia since 1975. His political career began in 1952, with his election to Parliament, where he later chaired a number of Committees (among them the Joint Parliamentary Committee on Foreign Affairs). Serving under several Liberal Administrations, he has filled ministerial positions including Minister for the Army, Minister for Educa- tion and Science and Minister for De- fense. percent in one year, which some people might find hard to believe. As a result, unemployment approached 200,000 in that same year. So there is a message in this for those who sug- gest that higher government spend- ing is a way to overcome the unem- ployment problem. Higher govern- ment spending, plus rather foolish wage policies in 1974/75, added enormously to unemployment. Over- coming recession and getting busi- ness into a lustier and more hopeful mood is obviously very important. Recently business has been start- ing to look to the future with much greater confidence. For example, the Commercial Bank of Australia made a statement recently saying there is no doubt that recovery is under way, and warned against undue stimula- tory measures at this time; i.e., tax cuts. Getting the economy moving sensibly with a much lower level of inflation is obviously an immediate objective. We need, however, an appropriate balance, an interrelationship be- tween major industries and tertiary industries. The fact that we gain sub- stantial funds from overseas as a result of our mining industry does sometimes put a strain on the manu- facturing sector, which is a much larger employer than is the mining sector. The industries that have been hit by recession over the last three years are the manufacturing and rural industries. The rural industries might well be more resiliant than the manufacturing industries since they are used to substantial shifts in their balances and profitability and are not as labor intensive as are many of the manufacturing industries. What role do you see the foreign investor having in your own develop- ment? A very useful and very welcome role. Much of where industry is mov- ing forward in Australia is due to the role of the foreign investor. In the motor industry, there have been commitments to over $300 million in new investment-new models and new companies coming into this Prime Minister Fraser (left) discusses Australian development priorities with IMDI President Gene Bradley Approved For Release 2004/03/16 : CIA-RDP80M00165AO02500040027-5 Approved For Relent 2004/03/16: CIA-RDP80M00165AQQ2590040027-5 AUSTRALIA IN BRIEF LAND: 7,692,300 km2; 6% arable, 58% pasture, 2% forested, 34% other. POPULATION: 13,808,000 (January 19:77), average annual growth rate 1.7% (1966-76). LABOR FORCE: 4.76 million; 14% agriculture, 32% industry, 37% ser- vices, 15% commerce, 2% other. GNP: $83.0 billion (1975), $6,050 per capita; 60% private consumption, 16% government current expendi- ture, 24% investment (1975); real average annual growth 3% (1970- 75). MAJOR INDUSTRIES: Mining, baux- ite, industrial and transportation equipment, food processing, chemi - ca/s. EXPORTS: $11.9 billion (f.o.b., 1975); principal products (1975)-44 % agri - cultural products, 14% metalliferous ores, 8% wool, 8% coal. IMPORTS: $11.1 billion (f.o.b., 1975). MAJOR TRADE PARTNERS: (1975) exports-29% Japan, 10% U.S., 5% New Zealand, 5% U.K.; imports- 20%, U.S., 15% U.K., 18% Japan. country to manufacture. This is a fairly significant investment. Mining developments are going forward, and the sums involved with these are so large that Australia has no hope of finding the capital that is required. The Northwest Shelf proj- ect might be $3 billion. If those funds were to come from Australian sources, other users of capital in this country would be very much starved of funds, and this is just not possible. Investments are welcome then in all sectors of your economy? They are welcome wherever de- velopment is involved. There are some exceptions, however. There are special rules for uranium, requiring tougher local ownership restrictions, and I think you would understand the reason for that. There are particular national sensitivities, I think, in any country. It is necessary to strike an appropriate balance between na- tional aspirations, which any country would be expected to have, and the reality of economic circumstances. By doing so, we make the position of foreign investors in this country se- cure for the future. They know the processes that are gone through, and that they have been designed to protect the national interest. It is much less likely, therefore, that at some time in the future anyone will foolishly come along and try to raid the multinationals. I think our policy will prevent that from ever happening in Australia. I believe that you see the log-jam breaking; that a forward motion is now beginning in foreign invest- ment. Is this correct? Yes, the log-jam is breaking. Quite obviously, investors wait to see what a country is doing in a number of areas. We have made our attitude toward foreign investment known di- rectly and indirectly. One thought I have heard stressed is that people from overseas believe they are un- welcome. I want to know about this, or the Treasurer wants to know about it, because this is not the impression we want to convey. Most people I have met from Europe and especially from the United States have ex- pressed appreciation and under- standing of the policies that we have adopted. A large number of projects have gone to our Foreign Investment Review Board, and they have been accepted overwhelmingly. Now coal projects are starting to move into Queensland. I mentioned the substantial and firm investment that has been announced in the motor industry. In Western Australia very significant investments in the minerals area and processing area are starting to move forward again. So I would believe the log-jam is breaking, and I would certainly hope that Australia is well on the way to- ward reestablishing confidence of the kind that we would want around the world. I would like to mention one other point. Concern had been expressed by the United States, Japan and Eu- rope about industrial relations and labor problems. I think that might well have been the greatest inhibiting factor to foreign investment if I judge the views properly. The time lost through industrial disputes last year was much less than it had been for a very long while. There was dra- matic improvement in the situation that prevailed under the previous Ad- ministration. For example, I can cite the following figures on the time lost through strikes. In 1975 there were 3.5 million man days lost, while in 1976, on normal industrial matters, only 1.7 million man days were lost. So that is a very significant improve- ment in our first year in office. Wages lost in 1974 were $128 mil- lion, in 1975 $95 million and in 1976 $60 million. There has been a con- tinued improvement in that area also. I do not think this message has been adequately understood overseas be- cause one still hears of an iron ore ship being held up by a strike in the Pilbara or something of a similar na- ture. But the situation is improving. We are slowly changing the nature of some of the industrial laws, an ac- tion which we believe is leading to an improved industrial climate. The Minister for Employment and Indus- trial Relations recently introduced very far-reaching measures which we believe will further improve the in- dustrial climate. Could you describe these mea- sures? What we are going to do is estab- lish an Industrial Relations Bureau which will have the effect of protect- ing individual trade unionists from oppressive action by employers or by their own unions.' There are sig- nificant instances of which I think we all know in many countries where unions can act quite oppressively 16 Approved For Release 2004/03/16 : CIA-RDP80M00165AO02500040027-5 Approved For-Release 2004/03/16: CIA-RDP80M00.j5A002500040027-5 in relation to their own members, maybe much more oppressively than employers would ever dream of do- ing under present circumstances. Basically, the Board is designed to uphold industrial law. It does borrow, in part, from American practice and the experience of the National Labor Relations Board. But it is a body that will have quite wide and significant powers. One of the problems that we have had in industrial relations in Australia is in redressing grievances. When an individual believes that he has suf- fered from an oppressive or unrea- sonable action, he has had to take action himself in the courts to get re- dress. If a company, or for that mat- ter a union, believes that it has been unfairly treated in industrial relations matters by the other party, it also has had to go to court directly. Now, the Industrial Relations Bureau, an inde- pendent third party, will have statu- tory responsibility. We believe that it will strengthen the practice of rea- sonable and responsible industrial laws in this country. I gather you would see improve- ment in industrial relations as a con- tinuing trend? This is certainly an objective. An- other problem, of course, is that a lot of time lost through labor disputes has been in areas which affect spe- cific export industries. Trade unions are now beginning to realize they are jeopardizing their own futures. One or two overseas countries have probably been on the receiving end of more than their fair share of in- dustrial disputes, because, as often happens in the industrial arena, the disputes get concentrated in one or two industries, in one or two loca- tions. This has also tended to give a false impression of the overall indus- trial climate, which I believe is im- proving quite significantly. Is there any distinction between the treatment received by domestic and foreign investors in Australia? If so, what is it? There is some distinction in rela- tion to resource projects, where we want to have equity ownership by do- mestic as well as by foreign inves- tors. I suppose, then, to this extent there is a distinction. In major re- source developments, our objective is 50 percent local ownership. But if we cannot have 50 percent, we do not want projects held up. The For- eign Investment Review Board judges these matters on the basis of our na- tional interest. In the overwhelming majority of cases, the propositions put forward have been accepted. I "It is necessary to strike an appropriate balance between national aspirations ... and the reality of economic circumstances." have not met anyone believing or saying that decisions of the Foreign Investment Review Board are restric- tive. I think our foreign investment policy is administered sensibly and flexibly. Once a man puts down his dollars, a foreign investment dollar is the same as a domestic dollar. What are the benefits resulting from foreign investors? Could you perhaps cite one or two examples? Benefits include advanced tech- nology, very expensive research, dif- ferent management practices, which can then be compared with one's own, and sometimes access to over- seas markets through avenues that are opened up through multinational companies. This, however, can be a two-edged sword. For example, there have been multinational companies which have produced goods in Aus- tralia and have then applied a limited export franchise for their operations -limiting countries to which exports can go. This is a practice we do not like. There are other significant benefits apart from the ones mentioned. One or two of the multinationals have be- gun to identify themselves in the Australian scene in the develop- alt Bu Approved For Release 2004/03/16 : CIA-RDP80M00165AO02500040027-5 17 Approved For Release 2004/03/16 : CIA-RDP80M00165AQ82500040027-5 mental areas. They build houses and schools; they virtually build towns. This is of lasting benefit to Australia. Some have become very closely identified with the development of, and support for, the arts in Australia. I think this is something to be ap- plauded because, while there is al- ready significant Government sup- port for the arts, we also want to at- tract more public support. Large multinational corporations obviously have a significant capacity to do this if they are so inclined. Since this tends to identify them with Australian aspirations and activities, it is also very good public relations. It makes people understand that they want to be good citizens, and want to con- tribute to Australian national life in ways that they can. I think multina- tionals are coming to understand this. But as in all things, the best ex- ample must still be followed by others. Many companies have undertaken active communications programs aimed at informing both the general public and their own employees of those beneficial aspects of their op- eraitions such as those you have just mentioned. What are your thoughts on this? One thought that my Government has been trying to promote within all industry is an awareness of industry's obligation to its own employees. We all look upon companies and under- stand their obligations to their share- holders; we understand that they have obligations to consumers- unless companies produce some- thing that people want, they will not survive very long. Going beyond this, I think there is also an obligation for multinationals, and for all com- panies, to help explain the free en- terprise system to their own em- ployees and to help them under- stand that it is the best system for them as employees. It gives them a choice of employer. It gives them greater control over the marketplace than they would get through any totalitarian system, where they would be told what to buy. It gives them freedom of choice in a great many areas where no other system would. If you are going to leave it to a political party alone to explain these benefits of free enterprise to em- ployees, I think it will take a long time. Surely, a good employer is in a better position than a government or a political party to put these ad- vantages to his own employees. Companies in Australia are starting to provide special reports, designed for their own employees. They ex- plain, for instance, what is happening in the company, and the problems caused by inflation. There is a very very long way to go in this yet, but I believe that all companies should pay much greater attention to ex- plaining to their employees both their own circumstances and the general benefits of the free enterprise sys- tem. This is an area which I think companies have neglected in the past. Returning to our earlier theme, do you see increasing opportunities for foreign investment in Australia? I think the opportunities are very great indeed for those who are pre- pared to come and take the initiative. In many areas, and especially for some of the more sophisticated manufacturers, I think Australia can, in part, become the workshop for Southeast Asia and other countries. Exports to New Zealand have in- creased quite markedly over recent years. For those with vigor and energy, I think there are great oppor- tunities. Do you feel that the balance of power in the Southwest Pacific has been significantly changed by the Communist takeover in all Indo- China? It has certainly not been helped. I think you would have to say that there has been significant change. A lot will depend on the future direc- tion of Vietnam's policies. China, the People's Republic of China, is itself very much concerned about Soviet influence, although it does not al- ways like to express it. The informa- tion available to us would seem to indicate that China is prepared to support stability in Southeast Asia. China does not want unsettled areas on that side, as those border areas are of particular concern because of the proximity to the Soviet Union. But the ASEAN countries (Association of Southeast Asian Nations: Indonesia, Malaysia, Philippines, Singapore, Thailand), I think, are growing in strength and unity, and therefore we support their policy that there should be no major power dominating in the area. We would say that a continued United States presence is utterly critical as a balance to the Soviet Union's presence in the Indian Ocean. We are concerned, as are the NATO countries, by a continued expansion of Soviet military power. Its presence in the Indian Ocean is really a symptom of the Soviet Union's growing world power. The NATO Foreign Ministers have drawn attention to this on many occasions in recent years, and have repeatedly expressed grave concern about the seriousness of the situation. That is not something we could ignore, but I make the point that any withdrawal of United States strength or any diminishing of United States resolu- tion would have very far-reaching implications-far-reaching implica- tions for China's and Japan's policy. This emphasizes the important world role of by far and away the most powerful and the most significant democracy that the world has ever seen. In conclusion, we would like to focus on your country's role as a rapidly emerging actor in the world scene. Do you see Australia assum- ing an ever greater role as an Asian power? Power might be the wrong word, I think, but for a long while we have devoted a great deal of our diplo- matic initiative into the Southeast Asian and Asian area. We have taken initiatives in trying to achieve greater communication with China, in rela- tions with the ASEAN countries, in- dividually and together. There is no doubt that a very major part of our diplomatic initiatives will always be directed to this area. The extent that Australia can have influence de- pends, I think, on the quality of what we ourselves do. We have obviously been very much involved in South- east Asia on past occasions, in Ma- laysia, in Vietnam. I think it is natural that we should be very interested in what occurs in these areas since sta- bility in Southeast Asia is of great interest and concern to Australia. We want to do everything within our capacity and power to see that there is stability and progress, and that countries are allowed to develop in a way that their own citizens want, with- out interference. =. 'Editor's Note: Legislation establishing an In- dustrial Relations Bureau was passed in May 1977, but the proposed sections dealing with the rights of individuals were set aside for further consideration in the spring sitting of Parliament. 18 Approved For Release 2004/03/16 : CIA-RDP80M00165A002500040027-5 F ov el s Mov CIA-RDP80MOQ .65A002500040027-5 T H. E. Anwar EI-Sadat, President Outlining his nation's development priorities, President Sadat describes current efforts to stimulate foreign investment, which is "a cornerstone in Egypt's drive to rejuvenate its economy." Key points: ? Reforms have been launched to dismantle the bureaucracy which, in the past, has had a negative impact on foreign investment. ? Foreign investment is encouraged by liberal laws and regulations and is especially welcome when it fits within the framework of Egypt's development plans. ? Egypt is committed to increasing cooperation with the American people and sees American invest- ment as playing a key role in introducing needed technological advances. ? The present atmosphere in Egypt is conducive to expanded foreign investment, with prospects for peace greater now than at any time since the 1940s. Mr. President, you have repeat- edly stressed your desire to increase cooperation be- tween our nations in the area of eco- nomic and technological develop- ment. What are your goals and priorities over the next three to five years? How can foreign investment help you achieve these goals? Certainly, it is a matter of great im- portance to me and the entire Egyptian people to intensify and ac- celerate cooperation between our country and other nations in the area of economic and technological de- velopment. It has become quite evi- dent that we live in the age of inter- dependence and mutuality. There is an ever increasing universal feeling that all men have the same destiny and, hence, should pull their re- sources together to encounter the ANWAR EL-SADAT became Egypt's Pres- ident in September 1970. He was one of the founders of the Free Officers Commit- tee which led the successful revolution against the regime of King Farouk in -1952. In the years following, President Sadat held several government positions including Secretary General of the Na- tional Union, President of the National Assembly and Vice President. An accom- plished writer, he is author of the book Revolt on the Nile. tremendous challenges of the pres- ent and the future alike. No nation, however powerful, can live in isola- tion or remain unaffected by the turn of events in other parts of the globe. We, in Egypt, have more reason to adopt a policy of increased coopera- tion and mutual benefit with other nations, both on account of the magnitude of the problems we face today and the stage of socioeco- nomic development we are going through. When I assumed the awe- some responsibilities of my office, I decided that Egypt had no choice but to turn to an open door policy and liberalization. Our unique geo- graphic position in the heart of the Arab world and as the point that links three continents together cul- turally and economically makes it incumbent upon us to play a pivotal role in intensifying cooperation among nations. In particular, we are genuinely in- terested in increasing cooperation with the American people. We can, in my opinion, create a healthy partner- ship that would be equally beneficial to both of us. We welcome American investment in Egypt and we are do- ing all we can to reassure investors that they are not taking any risk by investing their money in Egypt. We remain open minded and willing to listen to any observations or sugges- tions they might have. According to our development plan, we aspire to reach the follow- ing goals in the next three years: ? Attaining a rate of growth between 7 and 10 percent. ? Decreasing the balance of pay- ments deficit. ? Accelerating savings and increas- ing it to 15 percent of the national income by the year 1980. ? Increasing the volume of invest- ment to 25 percent of the national income in 1980. ? Expanding our comprehensive pro- gram of desert development with a view to increasing the size of culti- vated land in Egypt, which stands now at a poor 3 percent of our ter- ritory. ? Reorienting our industrial produc- tion primarily towards exportation. ? Reconstructing our entire infra- structure which has been deteri- orating for the past 20 years. Would you please elaborate on Law 43, concerning your open door policy on trade? What are its benefits to Egyptian investors and foreign in- vestors? What distinctions, if any, do you make between domestic and foreign investors? What types of foreign investment do you most wel- come? We promulgated Law 43 in 1974 to stimulate foreign investment which is a cornerstone in our drive to re- juvenate our economy and infuse blood into our system of production and services. To attract foreign cap- ital, we inserted in that Law many provisions to ensure investors against nationalization, confiscation and expropriation. We granted them a tax exemption for five years, a peri- od we thought was enough to put the project in shape. This year, Law 43 was amended by Law 132 primarily to extend the privi- leges and exemptions enjoyed by foreign investment to domestic in- vestment. Nationally owned enter- prises were authorized to maintain in Egypt a bank account in foreign cur- rency to finance their imports of commodities and equipment. As to the type of investment we are seeking, any project would meet our need and requirement if it: ? Fits within the framework of our Approved For Release 2004/03/16 : CIA-RDP80M00165AO02500040027-5 19 Approved For Release 2004/03/16 : CIA-RDP80M00165AQD2500040027-5 development plan. It is easy to ver- ify this as our plan is published and available on demand. ? Contributes to our goal of increas- ing our industrial output. Thus, the project must be of a productive nature. ? Helps us develop our technology and know-how. ? Increases our exports. ? Effects, through joint ventures, an interaction between foreign and domestic resources. Within these guidelines, it does not matter much that the project falls in one field of economic activity or an- other. We understand that as part of your bid to attract hundreds of millions of dollars in Western investment, Egypt has established a high-powered committee to help foreign business- EGYPT IN BRIEF LAND: 1,000,258 km2 (including 57,498 km2 occupied by Israel); 2.8% cultivated (of which about 70% multi - pie cropped); 96.5% desert, waste, or urban; 0.7% inland water. POPULATION: 38,533,000 (January 1977), average annual growth rate 2.3%% (current). LAI3OR FORCE: 8 to 12 million; 45% to 50% agriculture, 10% industry, 10% trade and finance, 30% services and other; shortage of skilled labor. GNP: $11.2 billion (1975, in current prices), $300 per capita; inter -war an - nual growth rate of 1% or less ac- celerated to 4% -5% since 1973. MAJOR INDUSTRIES: Textiles, food processing, chemicals, petroleum, construction, cement. men bypass the country's traditional bureaucracy. Could you please com- ment on this and describe any other steps you may take to make it easier for foreign companies to do busi- ness in Egypt? Since we started to implement the open door policy to stimulate invest- ment and enhance productivity, proj- ects totalling about $3.5 billion were approved by the investment board. Of these projects, 161 have been completed and have started produc- tion. This is not to say we are fully satisfied with the progress that has taken place in this area. In fact, we believe that there is a need for con- stant improvement. We know the negative impact of our bureaucracy. That is why we recently launched an administrative reform to dismantle this bureaucracy and establish a new spirit which will expedite the process of decision-making and eliminate much of the red tape. Together with this, a high-powered committee for foreign and Arab in- vestment headed by the Prime Min- ister was set up in April 1977, to en- sure a prompt handling of all prob- lems related to investment. That committee includes the Deputy Pre- mier for Financial and Economic Affairs, the Ministers of Industry, Agriculture and Economy, together with two prominent men of experi- ence in this field. The committee is empowered to make any decision without having to refer to a higher body. Simultaneously, the Government embarked on a new program to rem- edy the balance of payments and free the banking system of all hin- drances and restraints. All such measures are designed to create an atmosphere which would be condu- cive to investment. It would appear that Egypt has a unique role to play in the economic development of both the Middle East and the developing world. With this in mind, what contribution do you think your country can make, and what actions have you taken to date? What contributions can the U.S. business community make in this field? Our role in the area is one of pi- oneering in most fields of socioeco- nomic development. We started industrialization early and, hence, we had a chance to accumulate the technical know-how and train a skilled labor force. We also attained a high degree of administrative and managerial skill. Thus, with the capi- tal available in the Arab world, we possess all the essentials of an ad- vanced and modern system of pro- duction. We would like to set a suc- cessful and attractive model for de- velopment in the area. Sister Arab states can benefit from our experi- ment to a great extent. That is not to say that our model can be copied elsewhere. Each and every country has conditions which are to a certain degree different. But it is definitely useful to take a look at similar ex- periments with all their positive and negative aspects. We also believe that it is our duty to assist our Arab brothers in their drive to develop their economies at a rate which is commensurate with the challenge of our age. The gap be- tween developed and developing countries is widening rather than narrowing. Therefore, developing countries have to exert a double ef- fort to rectify the situation. We are most willing to play an active role in this respect. We have no less than half a million Egyptian experts work- ing in various parts of the Arab world contributing to socioeconomic de- velopment in all fields. American business can contribute greatly to the process of overall de- velopment in the Middle East. First, the door is wide open for joint Arab- American ventures in the areas that can have an impact on increasing the productivity in almost every Arab country. To name but a few fields of economic activity, such cooperation can concentrate on: petrochemicals, fertilizers, pharmaceuticals, alumi- num, agroindustry, apparel, and in- frastructure. Conditions are favor- able for this kind of investment and the local component is available. American business can also con- tribute significantly to the process of transferring technology to the area on conditions which are acceptable and profitable to both parties alike. Your technology is most advanced and private firms are invited to share with us this great resource to our mutual benefit. As you know, capital is not much of a problem in many parts of the Arab world, and what re- mains is to effect a happy marriage between capital, technology, a skilled labor force, and markets. To tell you the truth, we expected American business to be more prompt and forthcoming in respond- 20 Approved For Release 2004/03/16 : CIA-RDP80M00165A002500040027-5 Approved For-Release 2004/03/16: CIA-RDP80M0&5A002500040027-5 irig to our invitation to invest in Egypt. Its response has been a con- servative one so far, despite our ef- fort to reassure all investors that they are not really taking any undue risks while investing in our country. We signed an agreement on taxa- tion with the United States. We en- acted a law to expand tax exemp- tions for foreign investment to peri- ods that range from 5 to 15 years depending on the type of activity. We have done much to improve our in- stitutions that deal with investment. To be sure, there was a response to that on the part of American busi- ness, but I think that the response was not proportionate with the exist- ing opportunities. The prospects for our economy are very good, and we al,e steadily improving our system of production and distribution. We are open minded about that and we so- licit any constructive suggestions. What are the terms on which multinational companies are expect- ed to operate in Egypt? Do you have a comprehensive legal framework which provides for the regulation of foreign investment, protection of "industrial property rights" (e.g., technology and trademarks) or re- patriation of capital and profits? Multinational corporations can do business in Egypt like any foreign company. They enjoy the same facili- ties, privileges and exemptions. The legal framework which regulates for- e gn investors is Law 74 as amended iri April 1977. Information on that Law is available on request and can be obtained from our missions aoroad. Beyond obeying the Law, which we assume will be observed by foreign investors, we expect them to contrib- ute to the development of our econ- omy and improve our production capabilities. Their projects should be geared to increase our output and improve our balance of payments. We would like to see more jobs for our workers. If investors experience any obsta- cles, they should know that we are flexible and willing to listen to their complaints. The Egyptian law pro- tects copyrights and industrial prop- erty rights. Technology and regis- tered trademarks are protected. We are a law-abiding nation and we ful- fill all our obligations under inter- national law. On the other hand, provisions have been made for repatriation of capital and profits. According to the existing provisions, repatriation could take place five years from the date the project began. That condition could be waived if the execution of the project was delayed for reasons be- yond the will of the investor. Capital could be repatriated upon the liqui- dation or the sale of the project. The transfer of capital occurs at the high- est listed rate of exchange and on five annual installments. However, the transfer could take place at once if the investor has an adequate de- posit in foreign currency. Many corporations have gone well beyond what are considered the "basic" functions of business, and are becoming involved in meeting the socioeconomic needs of the host community. And increasingly, host communities are welcoming this corporate "social involvement." Would you welcome this form of "social commitment" by corpora- tions in Egypt? Are there specific examples of "good corporate citi- zenship" by companies in Egypt? Do you encourage exchange pro- grams-in business, education, the arts, and culture-as a means of fos- tering closer understanding and co- operation? Yes, I would welcome this form of "social commitment" so long as the type of social activity undertaken by the foreign company meets a certain real need in the community. To en- sure that, the company would be well advised to consult in advance and on a regular basis with the cen- tral or local government which sets the priorities for social work. Egyptian companies have set a good example of "good citizenship." Some are financing training centers for technicians and skilled workers. Others have established research centers in fields which are not direct- ly related to theirs. This is over and above the social and medical serv- ices the companies provide in com- pliance with legal requirements. Much remains to be done, especially in rural areas. We are launching an ambitious program to rebuild four thousand Egyptian villages. We en- list the contribution of the local com- munities as well as the business cir- cles in this campaign. We would like to raise health standards in the country. We are combatting illiteracy and we welcome any help in this field. We are trying to develop agro- industry and I think that American companies are most qualified to co- operate with us in this area. I have always been a staunch ad- vocate of closer ties among nations in all fields. Of course, exchange programs in business, education, art, and culture would be a very ap- propriate means of attaining such a goal. The essence of our new open door policy is to stimulate more in- teraction with other nations in vari- ous domains. Its sphere is by no means limited to commerce and business. Is it possible to move forward with strengthening your economy and truly encouraging substantial for- eign investments until the war issue has been settled? What is your can- did assessment of U.S. policy to- ward the Middle East under Presi- dent Carter? What is Egypt's most urgent need, and is it likely to be met? I believe that we have a golden op- portunity to establish peace in the Middle East for the first time since the early 1940s. We are determined to reach a peaceful settlement. President Carter is cooperating with us and he has demonstrated a genu- ine dedication to the cause of peace. He grasped the crux of the matter and the intricacies of the conflict in such a short period of time. With his thoughtful leadership, the American people can play a historic role in putting the area on the threshold of peace after decades of war and devastation. I must add, however, that the pres- ent situation in the Middle East is conducive to an expanded program of investment. There is enough sta- bility, and if I am to speak of Egypt specifically, we have had a stable government for a long time. Pros- pects for more stability are bright, and every year our economy regis- ters an improvement. As I stated be- fore, we need capital investment and the introduction of the latest tech- nology to our system of production. Western technology can play a piv- otal role in this respect. By 1980, most of the problems that entangle our economy will be solved and we can concentrate more on refining and sophisticating our services and production machinery. In short, the time is now ripe for a headstart. American business is invited to enter with us in a just and equitable part- nership that could be beneficial to both of us. Approved For Release 2004/03/16 : CIA-RDP80M00165AO02500040027-5 21 proved For Release 2004/03/16 : CIA-RDP80M00165AD2500040027-5 ITALY 111M H.E. Giulio Andreotti, Prime Minister In this discussion of investment activities undertaken by international corporations in Italy, Prime Minister Giulio Andreotti reveals that: ? Italy endeavors to encourage foreign investment by maintaining a liberal investment climate. ? There is need, and opportunity, for joint ventures on the part of Italian companies and MNCs in sectors involving advanced technology. ? Ideally, the multinational corporation should commit itself to a long-term relationship with Italy, not relocate in the event of difficulties. ? "Participation in the life of the whole community" is what Italy ultimately wants from the interna- tional corporation. r. Prime Minister, would you FA elaborate, please, on what your priorities are in terms of economic development? The Government's program to strengthen the economy has been presented to the people and has also received approval from our Parlia- ment. Now, what we want to achieve within a 12-month framework is to reduce the rate of inflation from 20 to 13 percent, and to achieve at least a modest growth rate at the same time. This program is going to be dif- ficult to put into practice, but we are convinced that it is feasible. What is Italy's policy in regard to foreign investment? Since the end of World War II, Italy has always welcomed foreign invest- ments. Foreign capital has been a relevant factor in at least seven branches of industry: electronics, cosmetics, cleansing agents, photo- sensitive materials, roller bearings, petroleum products, and electro- mechanics. This policy is not only due to a decision on principle, but also to the understanding that direct foreign investments contribute to an improvement of our balance of pay- ments and to our industrial develop- ment. Direct foreign investments in Italy are regulated by the Foreign Invest- ment Act of February 1956, which is one of the most liberal laws passed in any industrialized country. This legislation on foreign investment seeks to ensure the equal status of foreign and domestic investors. With the exception of some areas in which foreign investment is subject to certain restrictions-ship owner- ship, aircraft ownership, regular air transportation services, and the opening of banking establishments or branch offices of foreign banks- foreign investments can be made freely in all sectors of the economy. It is evident that a great unaware- ness still exists of the benefits that multinational corporations bring to the countries in which they operate. Would you please comment on this? I believe it is necessary to make a distinction between the general opinion about MNCs and an evalua- tion of their actions. As far as the latter is concerned, I believe that the evaluation should be positive. Here in my country, at least, multinational corporations have contributed to increasing the standards of Italian industry. In some lines, completely new products have been developed- particularly in the fields of elec- tronics, pharmaceutics and cleansing agents. It must be said that in many instances direct foreign investments are the only means of introducing advanced technology. Another significant contribution of foreign investment concerns com- mercial and managerial skills, which, as a rule, spread rapidly from foreign companies operating in Italy to na- tional companies operating in the same sector of the economy. Furthermore, joint venture com- panies have made substantial con- tributions to employment and ex- ports. What, in your view, are the princi- pal drawbacks or problems of for- eign investment in your country? GIULIO ANDREOTTI, Prime Minister of Italy, pictured here following his interview with Mr. and Mrs. Gene Bradley, has had a long career in Italian politics, serving under several administrations. Over the years, he has held several Cabinet-level posts, including Minister of the Interior, Finance, Treasury, Defense, Industry, and Prime Minister (1972-73). He has served as Managing Editor of Concretezza, a political magazine, as well as author of several historical works. 22 Approved For Release 2004/03/16 : CIA-RDP80M00165AO02500040027-5 Approved -or-Release 2004/03/16: CIA-RDP80MOO4$5A002500040027-5 Some apprehensions have arisen in recent years, due mainly to the di- vergence between the objectives of international corporations and na- tional economic objectives. Specifi- cally, problem areas include: Excessive influence of MNCs on the quantitative and qualitative aspects of economic develop- ment. Overdependency of one part of a host country's economic activity on decision-making centers out- side that country. Inequitable transfer pricing of products from parent company to subsidiary company abroad. Disruptive effects on the balance of payments by the short-term transfer of large amounts of money. As far as Italy is concerned, one of the principal drawbacks of foreign investment in this country is the fact that the companies concerned seek to raise the funds needed for invest- ment on the Italian capital market, limiting as much as possible their own financial contribution. This means that there is a drain on funds which otherwise would be available for other activities. Such a situation is particularly bad for a country in which saving for investment is a rela- tively recent development and not yet strong enough to satisfy our own investment needs. What are the terms on which mul- tinational companies are expected to operate in your country? The apprehensions which may arise concerning the activities of multi- national corporations could be at- tenuated-if not overcome-through the application of the provisions of the OECD "Guidelines for Multina- tional Enterprises," approved by member governments on June 21, 1976. A correct application of the OECD code could lead to a better balance between the expectations of multinational corporations and those of the host community, and could, therefore, contribute to a more fa- vorable foreign investment climate. One of the most obvious charac- teristics of multinational companies is their geographic mobility in pursuit of immediate profit. It would be de- sirable if, on the contrary, MNCs would look upon their presence in Italy on a long-term basis, taking into account the opportunities for profit over the last few decades, as well as the general advantages resulting from active international integration. In a situation in which the major industrial enterprises in Italy suffer severely from undercapitalization and in which national investors do not feel particularly attracted by in- vestment in securities, an influx of capital for investment from abroad would certainly be desirable. Such a development would strengthen the financial structure of companies in which the amount of locked-up money very often is much higher than the total stock exchange value. The recent Libyan financial contri- bution to Fiat shows that foreign in- vestors may find it extremely interest- ing even to embark upon minority participation in industrial activities in this country. It would be desirable if at least in those sectors which are of strategic importance for economic growth- i.e., in those sectors which make use of advanced technology (deepwater exploration for oil, nuclear power plants, nuclear fuel cycle, aeronau- tics, etc.)-joint ventures would be initiated between Italian companies and multinational corporations. With- in such joint ventures licensing ar- rangements should be based on the principle of gradual transfer of tech- nology and know-how and on the principle of unhampered freedom of competition on international mar- kets. Given the great demands on capi- tal resources to meet environmental and energy needs, are you contem- plating any steps to attract foreign investments important to your de- velopment? The heavy demands for capital re- sources raise difficult problems of financing which cannot be solved on a national basis. This is why we have to rely on foreign capital which can be attracted only if satisfactory in- vestment conditions are brought about. The Italian Government is striving to stabilize the economy and to restore a climate of trust favorable to foreign investments. Also, the positive conclusion of the recent IMF negotiations, together with an improvement in the economic situation of the country, are prerequi- sites of fundamental importance to the reactivation of the flow of foreign capital-public and private alike-to Italy. As far as administrative proce- dures for investment activities are concerned, they are no more com- plicated than those existing in many other countries. This does not mean, however, that there are no problems. For example, there are currency risks resulting from the economic situation. Further- more, the fiscal policy in Italy is less favorable, in some instances, than in other countries. It is obvious that every possible effort must be made to harmonize taxation of capital re- sources invested in Italy with that of capital invested in other countries. Parliament is at present dealing with a series of important bills pre- sented by the Government concern- ing the conversion, rationalization and reorganization of industry, as well as the increase of export credits and more favorable tax regulations for capital investments. If these bills are passed, they will offer foreign investors more favor- able conditions for the purchase of plants which are being reorganized, for the subscription of capital and for the exportation of finished prod- ucts manufactured in Italy-and thus for making contributions to our eco- nomic growth. Corporations have been getting involved in meeting the needs of the whole society-not just in producing goods and services. For example, IBM has a scientific center which helps to study the Arno River to pre- vent future flooding like that of 1966. In addition to management training, do you welcome participation in the social development of communities? I agree that multinational compa- nies should work within the com- munity. One good example of this is the Shell Company, which yearly has carried out special research-style surveys of general interest and pub- lished reports on problems of youth. I think that participation in the life of the whole community is something which multinational companies should achieve. They should certainly try to work for the community at large and also take part in research and analytic work concerning the problems of the community. This, I believe, is ever so important. There is another important aspect, however. I believe that multinational companies should not operate only in one country or concentrate all ac- tivities in one place. Rather they should try to distribute their opera- Approved For Release 2004/03/16 : CIA-RDP80M00165AO02500040027-5 23 Approved For Release 2004/03/16: CIA-RDP80M00165AQQ2500040027-5 ITALY IN BRIEF tions evenly over various countries. This would help to solve the unem- ployment problem of so many peo- ple-and thus further develop trade and benefit society, I think that if multinational companies would op- erate that way, it would give them a meaningful presence within the host community. Are there particular areas in Italy where multinationals are not in- volved and where you see a definite need for their involvement? I believe it would be extremely helpful and would also improve the image of multinational companies with public opinion if multinationals could develop a detailed program concentrating on the development of some sectors in southern Italy- the least developed region of our country. What would really be extremely helpful to our young people would be a survey looking at employment prospects in future years within the nine countries of the European Eco- nomic Community. Do you think the MNC will be writ- ten about 50 or 100 years from now as a force for social and economic good? It is rather difficult to envisage what historians are going to tell us about multinational corporations within 50 to 100 years. It is extremely difficult even today to perceive what journalists are going to write or say the day after tomorrow. Anyway, I believe that the final, definite ap- praisal of multinational corporations is going to be essentially positive. After all, they have contributed very much to industrial development in a great number of countries. The appraisal will be all the more positive if multinational corporations become truly international; i.e., if the various executives working in top managers' positions come from all different countries. I believe that this would be quite important for the overall image of international cor- porations. LAND: 301,217 km,; 50% cultivated, 17% meadow and pasture, 21% for- esi', 3% unused but potentially pro- ductive, 9% waste or urban. POPULATION: 56,410,000 (January 1977), average annual growth rate 0.7% (1966 - 76). LABOR FORCE: 19,549,000 (January 1975); 15.0% agriculture, 42.9% in- dustry, 39.0% other; 3.3% unemploy- ment (1975), 5.6% if underemployed (those working less than 33-hour work week) are included; 1.5 million Italians employed in other Western European countries. GDP: $172 billion (1975), $3,090 per capita; 67.5% private consumption, 21% gross fixed investment, 14.0% government; net foreign balance- 6.1%; 1973 growth rate 6.3%, 1974 growth rate 3.4%, 1975 growth rate- 3.5% (1970 constant prices). MAJOR INDUSTRIES: Machinery and transportation equipment, iron and steel, chemicals, food process - ing, textiles. EXPORTS: $34.8 billion (f.o.b., 1975); principal items-machinery and transport equipment, textiles, food- stuffs, chemicals, footwear. IMPORTS: $38.4 billion (c.i.f., 1975); principal items-machinery and transport equipment, foodstuffs, ferrous and nonferrous metals, wool, cotton, petroleum. MAJOR TRADE PARTNERS: (1975) 43.6% EC-nine (18% West Germany, 15% France, 4% Netherlands, 4% U.K., 3% Belgium -Luxembourg); 8% U.S.; 3% U.S.S.R. and 3% other Communist countries of Eastern Europe. "The Italian Government is striving to stabilize the economy and to restore a climate of trust favorable to foreign investments." 24 Approved For Release 2004/03/16 : CIA-RDP80M00165AO02500040027-5 H.E. Johannes Marten den UyI, Prime Minister Prime Minister den Uyl, commenting on the role of foreign investment in the Netherlands, affirms that his country is an "open and outward-looking country." Major observations: ? Foreign investment is encouraged in all sectors of the Dutch economy especially when it con- forms with national economic priorities. ? The nearly 1,000 foreign industrial undertakings in the Netherlands have a positive effect on the economy-boosting employment, contributing to GNP and an even balance of payments, and transferring "know-how." ? Especially welcome are high-technology industries, "knowledge industries," or research centers which would tap a well-educated population and provide future opportunities for a diversely edu- cated younger generation. ? Nations must keep their lines of communication and understanding open in order to solve mutual problems together and "prevent protectionism from having a chance." Mr. Prime Minister, much of the focus in international re- lations today has been on the economic aspects of foreign policy. 'Viewing the Netherlands in this con- text, could you please give us a brief sketch of the Dutch economic situ- ation? In the course of the postwar period, there have been marked shifts of emphasis in our economic policy. After periods of massive economic growth and inflationary trends, our policy is now aimed at restoring and maintaining a high level of employ- ment, with great emphasis being placed on stimulating industrial in- vestment, maintaining purchasing power and curbing inflation. This policy is clearly beginning to pay off. Whereas in 1975 prices rose by 10.5 percent, in 1976 the rise was only 9 percent and this year it will be reduced to between 6 percent and 7 percent. While unemployment has proved an intractable problem, reaching a peak in 1976 at 5.5 per- cent, it has in fact been falling be- tween August 1976 and February 1977. Recent figures show a slight deterioration again. Industrial invest- ment, which has declined for the past two years, is expected to grow by 8 percent this year. Substantial sums have been set aside to help busi- nesses experiencing temporary diffi- culties to survive and to stimulate new investment. In addition, the Government has succeeded in limit- ing the drop in home building to 20 percent. Much attention is also being paid to urban renewal and public transport. Thus, the current objectives of Dutch economic policy can be sum- marized as follows: ? Balanced economic growth ? Even balance of payments ? High level of employment ? Reasonably stable prices ? Fair distribution of incomes ? Even spread of economic activities and population throughout the country ? Economical management of raw materials and energy. What are your priorities in terms of economic development? While the emphasis in the coming years will be placed mainly on pro- viding employment, at the same time efforts will be made to create condi- tions for achieving a lasting balance in industrial relations, a field where we already have a good record. Gen- eral education and specialized train- ing in Holland is at a high level, just as in the United States. Education is an important part of our policy. It is directed towards increasing people's knowledge and enabling them to participate more fully in society. This must, in turn, be reflected in the conditions under which people work and in the organization of the pro- duction process. I therefore see the first priority of economic policy to be the creation of jobs suited to the educational level of the population, and develop- ment of a more human production process with sufficient working in- centives. The second priority I consider to be the establishment of a social structure in which everyone involved in the economic process can actively participate, and in which those who are no longer able to work can lead a worthwhile existence. The third priority should be the de- velopment of an infrastructure capa- ble of ensuring that towns remain habitable, that traffic congestion is kept to a minimum and that the rate at which natural resources are con- sumed is cut back to more sensible levels. What role do you see for foreign investment in all this? Selective economic growth is essential if our goals are to be achieved. But it is also necessary that the more prosperous countries en- able the less prosperous countries to accelerate their economic de- velopment. JOHANNES MARTEN (JOOP) DEN UYL is the Prime Minister of the Netherlands. Serving in Parliament since 1967 as polit- ical leader of the Labor Party, he became Prime Minister in 1973. In an earlier cabinet, he held the post of Minister of Economic Affairs. Mr. den Uyl has a back- ground in journalism and political re- search in addition to his service in munici- pal and national politics. He is a Knight in the Order of the Netherlands Lion. Approved For Release 2004/03/16 : CIA-RDP80M00165AO02500040027-5 25 Approved For Reloase 2004/03/16: CIA-RDP80M00165AQQ2500040027-5 NETHERLANDS IN BRIEF LAND: 33,929 km'; 70% cultivated, 5% waste, 8% forested, 8% inland water, 9% other. POPULATION: 13,868,000 (January 1977), average annual growth rate 1.0% (current). LABOR FORCE: 4.7 million; 30% manufacturing, 24% services, 16% commerce, 10% agriculture, 9% construction, 7% transportation and communications, 4% other; 4.8% un - employment (August 1975). GNP: $80.4 billion (1975, in 1975 prices), $5,900 per capita; 58% con- sumption, 21% investment, 19% government; 2% foreign balance; average growth rate, 4% in constant prices (1966-75). MAJOR INDUSTRIES: Food pro- cessing, metal and engineering prod - ucts, electrical and electronic ma- chinery and equipment, chemicals, petroleum products, and natural gas. EXPORTS: $35 billion (f.o.b., 1975); foodstuffs, machinery, chemicals, petroleum products, natural gas, textiles. IMPORTS: $34.5 billion (c.i.f., 1975); machinery, transportation equip - ment, crude petroleum, foodstuffs, chemicals, raw cotton, base metals and ores, pulp. MAJOR TRADE PARTNERS: (1975) 63% EC, (28% West Germany, 13% Belgium -Luxembourg), 6% U.S. Foreign investment fits very well into the economic setting of this country, situated as we are around a major port that is a gateway to Eu- rope, and having as we do an effi- cient system of modern transporta- tion and communication, a compe- tent and highly qualified working population and a strongly developed services sector. What are you doing to facilitate foreign investments important to your development? There are a number of licenses which both Dutch and foreign com- panies need if they are to set up here or if they wish to expand their industrial activities. These licenses relate, among other things, to safety at work and environmental protec- tion. Part of our policy is aimed at ensuring that the various licenses dovetail with one another and that applications for licenses are dealt with more quickly, so that unneces- sary delays in the investment pro- cess are avoided. Companies them- selves can do a great deal to help, for instance, by involving the Gov- ernment in their projects at an early stage. What is the policy in regard to for- eign investment in your country? In view of the desirability of ex- panding and strengthening various sectors of economic activity, we en- courage foreign investment. In prin- ciple, this investment occurs in al- most all sectors of our economy, the exception being that in a few sectors such as public utilities, concessions are granted to government or semi-governmental organizations. What distinctions, if any, do you make between domestic and foreign investors? The laws and conditions relating to non-discrimination which apply to all investments in the Netherlands must, of course, be observed. There are no discriminatory measures in this country against foreign investors or establishment of foreign under- takings; that this is so is manifested by the large numbers of foreign companies operating here. Besides having to comply with Dutch law, for- eign companies naturally must con- tend with Dutch usages and condi- tions. That is not such a great im- position, however, as Holland is an open and outward-looking country. Moreover, the continuity of the pro- duction process is better safe- guarded here than in many other European countries. I should also like to mention that the Netherlands has always adhered closely to the international agree- ments regarding the liberalization of international investments made with- in the framework of the EC and the OECD. What do you see as the principal benefits of foreign investment in your economy? There are almost 1,000 foreign in- dustrial undertakings in the Nether- lands, 35 percent of which come from the United States. The Ameri- can companies are engaged mainly in the metallurgical, chemical and electrotechnical industries. In addi- tion, more than 400 foreign com- panies-of which a quarter are American-have shareholdings in in- dustrial undertakings in this country. It is self-evident, therefore, that foreign economic activities have se- cured an important position for themselves in the Netherlands, both by boosting employment and by contributing to the national product and the balance of payments. I should mention in this connection that Dutch imports and exports ac- count for half of our Gross National Product (GNP). The petrochemical sector, in par- ticular, makes a substantial contri- bution to the national economy. A number of foreign companies active in this sector in Holland have a com- bined capacity far exceeding Dutch requirements. This capacity, under- standably, is geared mainly to ex- ports. The importance of these foreign companies can also be judged from the fact that the five largest multi- national concerns in the country, which are predominantly Dutch in character, provide almost 20 percent of all jobs in industry. In 1974 they accounted for almost a third of the investments made. Foreign undertakings are so inter- woven in our industrial life that no special account is taken of them in economic planning. Recognizing the importance of foreign investment, Holland goes out of its way to at- tract foreign investors and provides assistance when establishments are set up here. Another benefit to us is the tech- nology transfers which occur through foreign investment. If we are to 26 Approved For Release 2004/03/16 : CIA-RDP80M00165AO02500040027-5 Approved Fo Release 2004/03/16: CIA-RDP80M001,65A002500040027-5 maintain our relatively high level of expertise in various sectors, it is important to have great research po- tential. Already 2 percent of the GNP is allocated to research and development, about half of which is carried out by industry. It is not possible, of course, for a compara- Lively small country such as the Netherlands to be deeply involved in all areas of research. However, there is an exchange of know-how in this country since a great many of the foreign companies are part of large concerns which have their own re- search facilities. It is our experience that know-how acquired from foreign companies benefits not only indus- trial development but also the de- velopment of the commercial and services sectors. What, in your view, are the princi- pal drawbacks or problems of for- eign investment in your country? If one looks at developments in trade and in the flow of capital since World War II, one has to conclude that the liberalization which has taken place has led to a marked interna- tionalization of commerce and in- dustry. In a number of cases, this has led to areas of possible conflict be- tween the ways in which multinational companies pursue their goals and the policies of national governments. As far as this country is concerned, multinational companies are, of course, subject to Dutch law just as any other companies established here. I think, however, that it would also be useful if certain matters were regulated internationally, for in- stance by a code of conduct for multinational companies. This would lessen the chance of the possible conflicts mentioned above actually occurring and would allow the interests of the two sides to be properly balanced. What do you see as the advan- "Companies themselves can do a great deal ... by involving the Government in their projects at an early stage." Approved For Release 2004/03/16: CIA-R nology industries, "knowledge in- dustries" involving a high degree of skill, research centers and the head offices of large concerns. There is still room for expansion in the services sector, and our inter- nationally oriented banks and insur- ance companies are still expanding considerably. In view of the quality of Dutch agriculture, and the fact that it is in a strong position internationally, there must also be room for expansion in animal production farms. Our policy is aimed at ensuring that the Dutch capital-goods industry can consolidate its position in exist- ing markets and can gain a foothold in new markets now opening up abroad. There are therefore many sectors in which foreign investors can play a positive role, and their activities will be appreciated all the more if they mean a big boost to employment. One development which is caus- ing increasing concern among both developed and developing countries is the growing trend toward protec- tionism. Could you please comment on ways of controlling this trend? We have entered an era of higher prices for energy and raw materials, of slower economic growth and of more difficulty in offering a sufficient number of jobs for our growing population. We have to use all our strength and contacts to prevent protectionism from having a chance, because that would mean not only disaster for the Third World coun- tries, but also, in the long run, lower levels of prosperity for the industrial countries as a whole. Exchange programs, private and public, can help to maintain the com- mon understanding that is necessary to solve our problems together in- stead of shifting them to our neigh- bors. ^ tages and disadvantages of the vari- ous forms of investment; e.g., equity ownership, licensing arrangements, joint ventures? In this country, the foreign investor is free to choose whether to enter into collaboration with other under- takings, and, if so, with whom. This freedom is inherent in our mixed economy, where the making of deci- sions by both individuals and com- panies is decentralized. It is up to the Government to de- fine the framework within which these decentralized responsibilities are to be exercised. This framework must ensure that the developments which take place run along the lines which the community wishes. To accomplish this, the Govern- ment does not necessarily have to own a share of the operations. In specific cases, however, the Govern- ment is prepared to take a share, if only temporarily, of the capital of companies when the risk of starting a venture is too great to be borne by the entrepreneur alone. I should add that even those com- panies in which the Government has an interest must function within the market mechanism. In the Nether- lands, moreover, that mechanism is very much subject to influences from abroad. For this reason Gov- ernment participation must not be allowed to distort normal competi- tion. Are there particular areas or sec- tors of the economy in which invest- ments by multinational companies are particularly welcome? As you know, Holland has a well- educated population, and many good schools, universities and vo- cational institutions. Suitable work must be available in the future for the younger generation with their varied educational backgrounds. We are thinking especially of high-tech- Approved For Release 2004/03/16 : CIA-RDP80M00165A0Q2500040027-5 MISSION OF THE i 11i it iROPEAN COMMUNITIES T.R.H. Roy Harris Jenkins, President The European Community (EC) is facing growing economic and political challenges. In the following statements Messrs. Roy Jenkins and Fernand Spaak describe the EC's efforts to meet these chal- lenges, including: ? Setting unified Community goals of full employment, reduced inflation and greater price stability. ? Achieving a "Uniting States of Europe" with a mix of Community and national policies. ? Guaranteeing equal treatment of foreign and domestic investment-through unified commercial legislation applicable in all member states. ? Helping to build a framework for constructive dialogue between developed and developing coun- tries on achieving and maintaining a stable world economy. r. Jenkins, one increasingly PA hears discussion of the grow- ing sense of unity and coop- eration among the countries of Western Europe. In light of this, can you briefly describe the concept of a "European Community"? The European Community - or more exactly Communities, for there ROY HARRIS JENKINS is President of the Commission of the European Communities. For over a quarter of a century, he has served in the British Government. holding such posts as Minister of Aviation, Chancel- lor of the Exchequer and Home Secretary. He has also been the United Kingdom Dele- gate to the Council of Europe, as well as President of both the United Kingdom Coun- cil of the European Movement and the Labor Committee for Europe. are three (the European Community, the European Coal and Steel Com- munity, the European Defense Com- munity)-does not fit into any cate- gory immediately recognizable to the non-European public, and this makes it rather difficult to explain what "Eu- ropean Community" really means. Americans sometimes look for a kind of "United States of Europe" on the analogy of the United States of America, and find to their disap- pointment that no such organization exists. It is better to refer to the "Uniting States of Europe," which over the last 25 years have created institutions that are peculiar to them- selves and recognizably incomplete. Could you please elaborate on these institutions. In what areas has the Community centralized the eco- nomic policies of its members, and in what areas does it remain decen- tralized? Some parts of the Community's activities, such as agriculture, com- petition policy and external trading, are managed centrally through a common policy. Others, such as in- ternational finance and industrial cooperation with countries outside the Community, represent a mixture of Community and national compe- tence. And in respect to such other policies as transport, Community policies are still at an embryonic stage. But a cardinal principle for the Community is to set a framework of ground rules governing the activi- ties of the member states as a whole in the economic field to avoid the economic nationalism that has be- deviled the past of Europe, as of so much of the rest of the world. The movement toward European unity is still very strong. We come up against new obstacles from time to time. At present, for example, we are deeply concerned about some of the divergences in the economies of the member states. But it can be taken as a working hypothesis that what was true of the past will be true of the future, and that whatever the difficulties and setbacks, the forward movement will be maintained. The European Community must necessarily relate both economically and politically to the rest of the world. How does the EC respond to these global challenges? The Community has never shown hesitation in its response to the chal- lenges in the external field. Even where common internal policies have yet to be achieved, the Community has generally been able to develop its personality vis-A-vis the outside world, to speak with one voice and to take joint action when and where re- quired. Internationally as well as in- ternally, the Community is an estab- lished fact of life, an economic power exercising considerable influence in world affairs. The reasons are obvious. A few figures suffice to illustrate the Com- munity's international scope and po- tentialities: its population (of about 260 million) exceeds that of the United States or the Soviet Union; its gross domestic product (of more 28 Approved For Release 2004/03/16 : CIA-RDP80M00165AO02500040027-5 Approved For Release 2004/03/16: than $1.3 trillion in 1975) is almost as great as that of the United States; it does about 25 percent of world trade; it produces more steel and more passenger cars, it holds more monetary reserves and grants more official development aid than any other country; and it provides twice as large a market for the products of developing countries as the United States. No wonder the Community has be- come a growing pole of attraction and that it has developed a massive economic bargaining power, exer- cising its weight and responsibilities bilaterally and in international forums with regard to its European neigh- bors, its other industrialized partners and the developing world. In Europe itself, the Community has acted as a political as well as an economic magnet. Around this cen- tral nucleus is a web association and free-trade-area agreements with all the free countries of Europe. Greece is now negotiating, and Portugal has recently applied, for membership. Not far behind, Spain may follow. The Community has also drawn clos- er to such countries as Yugoslavia and those on the southern and east- ern shores of the Mediterranean. An issue of major importance to- day is the "North-South dialogue." Would you comment on the EC's re- lations with the developing coun- tries? Looking beyond the frontiers of Europe, the Community has taken up effectively and generously the chal- lenge of the developing world. The Lome convention linking the Com- munity, on a contractual basis, to 52 developing countries in Africa, the Caribbean and the Pacific, is an imaginative and constructive ap- loroach to North-South problems. A complex pattern of bilateral agree- ments with other Asian and Latin American countries completes this picture. The Community's contrac- ':ual policy has a universal counter- part in the system of generalized preferences offered to all developing countries. In international forums dealing with North-South issues, the Community is jointly and actively participating in the search for con- structive solutions. The contribution that the Com- munity is able to make in respect to the developing countries is of vital concern to its primary industrialized -RDP80 M 00465A002500040027-5 partners, among them the United States, Japan, Canada, Australia, and New Zealand. Europeans are taking on a growing portion of the burden of responsibility for the main- tenance and development of demo- cratic industrial societies. It means that in the eyes of the Third World there is an additional source of western power. But this is not the only responsi- bility that the industrialized countries are sharing. Our basic concern, and this is in the interest of all industri- alized countries as well as others, is to ensure through bilateral and multi- lateral action the maintenance and improvement of the free world trade system and the conditions of a stable world economy. These are the es- sential prerequisites for the survival of our democratic societies. How do you view U.S.-Community relations in this context? What will the impact be on the global econo- my? It is clear that the relations be- tween the Community and the United States play a predominant role, be- cause of their respective economic weight. Accordingly, Europeans and Americans bear a heavy responsi- bility to manage their relationship successfully not only for their own benefit, but also in the interests of the other industrialized and develop- ing countries. That is why it is good to know that in President Carter's view, "United States-European rela- tions lie at the heart of U.S. foreign policy." The Community welcomes these words and the challenge they imply. EC IN BRIEF* MEMBER COUNTRIES: Belgium, Denmark, France, Federal Republic of Germany, Ireland, Italy, Luxem- bourg, Netherlands, United King- dom. PURPOSE: The European Com- munity seeks to: ? put an end to national prejudice, discrimination and armed con - flict; ? make itself a single economic area, promoting social and tech - nological progress and the effi- cient use of resources in both agriculture and industry; ? recover some of the world in flu - ence that Western Europe's na - tions can no longer command separately; ? become a strong force for peace and a generous provider of aid to the world's poorer nations; ? contribute to world stability and the beginning of international law and order. LAND: 589,000 square miles. POPULATION: 260 million. LABOR FORCE: 102.361 million (1975): 9% agriculture; 43% industry; 48% services. GDP: $1.382 trillion (1976). MAJOR INDUSTRIES: Metals, chemicals, textiles, motor vehicles. EXPORTS: $157.8 billion (1976). IMPORTS: $178.3 billion (1976). MAJOR TRADE PARTNERS: United States clearly the leader with Japan, Saudi Arabia, Sweden, Iran, Switzer- land also high. *Source: European Community Information Service, Suite 707, 2100 M Street, N.W., Wash- ington, D.C. 20037. Approved For Release 2004/03/16 : CIA-RDP80M00165AO02500040027-5 29 Approved For Release 2004/03/16 : CIA-RDP80M00165AG02500040027-5 Expanding international trade, maintaining a stable yet flexible inter- national monetary system, devising pragmatic policies toward the oil pro- ducers, seeking consensus in the multilateral trade negotiations (MTN), the North-South dialogue, and the Law of the Sea conference- all are in the mutual interest both of the Community and the United States. Of course, we are at the same time competing with each other, and com- petition is desirable. Commercial re- lations and competition between two partners of such commercial size certainly have their built-in tensions. We must aim consistently, how- ever, at obtaining a more equitable balance of our bilateral trade figures. For instance, we are, at present, facing a serious swing against the Community in our trade with the United States. Our present annual trade deficit with the United States amounts to more than $7 billion. This will inevitably lead to growing pres- sures within the Community to seek more drastic remedies. Together we must resist growing temptations to give in to protection- ist pressures. Protectionism would necessarily lead to a decrease of world trade and thus increase un- employment and worsen business conditions. A political impetus has now been given at the London Sum- mit conference to resume the MTNs. We are confident, and the discus- sions at the Summit confirm this view, that our problems will be solved within a framework of basic understanding, and on the basis of a transatlantic give-and-take. S H.E. Fernand Spaak, Head of the Delegation r r. Spaak, to begin our inter- view, would you please de- scribe the priorities of the European Community in terms of economic development? Well I think the first priority we now have in Europe is to work to restore full employment. We have been liv- ing through nearly four years of very high rates of unemployment, which are creating a situation that is not only economically, but also socially and politically, difficult. Therefore, this is the first goal we have in economic policy. We have to restore full employment and reestablish a stable and sustained growth of our gross national product. And we must also try to reduce to a tolerable level the rate of inflation. Tne second of those objectives is essential: to go back to a situation of stable prices. If we are to keep our competitiveness in the world, we must have much greater price sta- bility than we have at the present time. This is also necessary if we wish to create and maintain as well the FEFNAND SPAAK, Head of the Delega- tion of the Commission of the European Communities since January 1977, is shown here in the EC's Washington, D.C. offices during his IMDI interview. Mr. Spaak's affiliation with the Community dates to 1952, when he was Chief Execu- tive Assistant to the President of the Euro- pean Coal and Steel Community's High Authority. Mr. Spaak was Director Gener- al for Energy from 1967 to 1975, and be- fore that served in the European Atomic Energy Community. necessary social climate. We have yet another problem, which is linked to the very nature of the Community: high rates of infla- tion that vary from country to coun- try. This is, of course, creating an element of disruption in the Com- munity itself, and is an added reason why we must go back to greater price stability. How does the Community plan to accomplish these objectives? I would say first and mainly through an active growth policy, regionally and sectorially balanced. Secondly, we are trying to convince both sides of industry-employers and workers -that they must take account of the overall economic constraints. As we work towards the reestablishment of a high degree of employment, a good relationship between these two groups is a very important target. What are we doing about this? Well, as you know, the economic and monetary policies of Europe are still national responsibilities. Never- theless, we are attempting the estab- lishment of a new kind of consensus in the Community by having repre- sentatives of the trade unions, em- ployers and governments sit around the same table. In other words, representatives of the three partners of economic and social life-coming from each country-sit together to try to agree on what the economic and social goals of the Community should be. They are also trying to create a sort of framework of eco- nomic performances valid for the Community as a whole, and compati- 30 Approved For Release 2004/03/16 : CIA-RDP80M00165A002500040027-5 Approved For Release 2004/03/16 : CIA-RDP80M0G+65A002500040027-5 ble with individual national economic policies. Mr. Spaak, what role do you see foreign investment playing in attain- ing these goals? Let me say right from the begin- ning that the rate of investment in the Community is now considered as far from sufficient. Last year the rate of increase was only 2.8 percent, and the prediction for 1977 is only 1.5 percent. Therefore, all invest- ments, anywhere in the Community -be they domestic or foreign-are welcome because we believe that, as I said, to achieve this goal of higher employment, we need all the possi- ble investments we can obtain. Given this increasing need for investment, what is the Community doing in today's competitive world market to become more attractive to foreign investors? We have been trying to stimulate investment since the very beginning of the Community. This is why we created the Community and why we have established a Common Market. We thought that one of the neces- sary conditions to increase invest- ments was to offer the investor a large market. This we have achieved. We can now offer domestic and foreign investment a market of 260 million consumers, a market where there are no tariffs, no obstacles to trade of any kind. Workers can travel, establish themselves, work in any of the countries without a permit or passport, and enjoy the benefits of a social security system of the country where they work. In other words, any citizen of Europe who wishes to work in Germany, for instance, can do so, and will benefit from the German social security system. And that is true in all our countries. Does the Community have an overall policy for foreign invest- ment? No. We have no overall policy as such regarding foreign investment. This does not mean to say that we are not giving greater priority to investments going to the depressed areas of the developing regions of the Community-southern Italy, the whole of Ireland, the development areas of Britain, Scotland and Wales, as well as west and southwest France, Greenland and a number of smaller areas. Foreign investment policy is na- tionally determined, and most na- tions within the Community have in- vestment agencies specifically set up to stimulate and oversee foreign investment. Some governments are giving more attention to the location of the investment or to the risk that foreign investment may take too dominant a part in an industrial sec- tor of particular importance. Although the Community does not set an overall policy, it does en- courage investment. The creation of the Common Market was the first achievement, and now we are trying to establish a common legal frame- work available for those firms incor- porated in our member states that would like to either establish them- selves in the Community as a whole or operate in various countries of the Community. This is what we call the European Company Statute or European Corporation. Would this Statute be applied equally to domestic and foreign companies? Yes. Companies that would es- tablish themselves in the Community would be able to benefit from this legal framework, which would be the same in the nine countries of the Community. We have not quite achieved it, however. As you may imagine, it is a very intricate problem to establish the same sort of rules of commercial law that could be appli- cable throughout the Community's nine countries. During the last several years, cor- porations have become aware of their social responsibility, as never before. Do you see this as a trend in Europe? Should American compa- nies operating in Europe become in- volved in extensive employee rela- tions programs, in specialized man- agement and technical training, in social involvement in the Com- munity, and in other aspects which go beyond the traditional functions of doing business? The most important attitude of foreign corporations is the fact that they consider themselves as part of the economic and social fabric of the country in which they operate. They should behave as if they were part of that country, and indeed they are, through the activities and the profit they are making there. Therefore, it is very important that foreign busi- nesses operating in Europe or else- where should behave towards the local, national and community prob- lems in the same manner as national or European businesses behave. Mr. Spaak, the international eco- nomic climate has recently been tur- bulent, with many fearing that the very survival of private enterprise is at stake. Would you please comment on what you see as the European response to this increasingly chal- lenging environment? The social climate has become a little more tense in Europe than it used to be, for one very good or very sad reason-a weakened rate of growth in Europe. This has reduced the size of the economic "cake" that can be shared every year. Therefore, trade unions find it more and more difficult to maintain a nonaggressive position. To overcome this, business needs to reach a stage of consensus with labor to explain its decisions in terms of investments and profits and to have them better understood by the forces of labor. This would lead to a better social consensus, which should make it easier to go through the lean years which we unhappily probably have in front of us. For example, there are a number of countries in the Community that have a worker participation system, with a national discussion among trade unions, the government and employers' organizations, such as the Union of Industries of the Euro- pean Community. In Britain, for in- stance, there have been two so- called "social contracts" under which the trade unions reached con- sensus with the two other partners that the rate of wage increases in 1975 should not go beyond 4.5 per- cent per year and in 1976, 6 percent. This is what we are trying to achieve through this tripartite discussion-all three partners exchanging views on these macroeconomic issues for the sake of the Community as a whole. It "The most important attitude of foreign corporations is the fact that they consider themselves as part of the economic and social fabric of the country in which they operate." Approved For Release 2004/03/16 : CIA-RDP80M00165AO02500040027-5 31 roved For Rele2tse 2004/03/16 : CIA-RDP80M00165A002500040027-5 M Secretary General Luns believes that "without economic strength and without healthy economic de- velopment, the NATO nations could maintain neither their military posture nor their cohesion." Spe- cific points emphasized during this interview were: ? Western Europe's security could be further guaranteed by greater corporate investment in the technological sector. ? The standardization of defense equipment is a major and ongoing priority for members of the NATO community. ? National lobbies and interests sometimes impede the political goal of U.S.-European balance in weapons and technology exchanges. ? In sum, NATO depends strongly on the role of business in helping to build solid foundations for a successful Atlantic Alliance. r. Secretary General, we would like to view the ques- tion of "What Governments Expect of Foreign International Cor- porations-and What International Corporations Expect of Foreign Governments" against the back- ground of national security, inter- nallional security and economic growth. Just how important is the economic strength of the NATO Community nations to the success of the NATO Alliance? In short, what is the interdependence of economic strength and security? There is no doubt that without eco- nomic strength and without healthy economic development, the NATO JOSEPH M.A.H. LUNS, Secretary General of NATO and Chairman of the NATO Council, is one of Europe's most experi- enced and distinguished diplomats. His appointment to NATO in 1971 was pre- ceded by a long and varied career in the Netherlands Government, including ser- vice as Foreign Minister, member of the Lower Chamber of Parliament and numer- ous diplomatic posts in the Foreign Ser- vice. The Secretary General has been awarded the Charlemagne Prize from the City of Aix-la-Chapelle and the Gustav Stresemann Medal. His published writings cover subjects of naval and international nations could maintain neither their military posture nor their cohesion. Weaknesses in the economic position of countries of the Alliance might, as a by-product, lead to countries try- ing to take independent measures against each other. Certainly, the re- cession of recent years has shown how interrelated economic strengths and military posture are. Compared to the Eastern bloc, of course, our economic strengths are immense. But the priorities given to the military posture are not often those which the present times de- mand. That is not so much the fault of the economic establishment as it is the fault of the political establish- ment. Would you care to comment on the role of international business in supporting the economic strength of the NATO community? It is not often said-it might well be said more often-that the role of the economic community is very, very great. International corporations, the multinationals, play an important role. As you know, parties mainly of the Left are now attacking the multi- na:ionals as bastions of repression and reaction. I do not agree at all with this. Our world is shrinking more and more; all interests are interre- lated. Therefore, I think the multina- tionals are necessary in keeping countries together and preventing them from taking independent and harmful actions against each other. Are there sectors of the NATO community where you would like to see more corporate investment? If so, what sectors? My first priority would be the sec- tors where technology plays a great role-electronics, for instance. We are at this moment witnessing a great effort on the part of the Soviet Union to overtake the West in its technological advancement. The Soviet industry has the advan- tage of being able to command that certain goods be produced. On the other hand, there is, of course, a disadvantage in that the Soviet in- dustry suffers from bureaucracy and from ill-directed action. Free enterprise plays a very great role in countries like the United States, the Federal Republic of Ger- many, the United Kingdom, or the Netherlands, where huge industries have been able to supply these gov- ernments with the technical know- how which allows them to be pre- pared for any emergency in the mili- tary as well as other fields. Could you cite illustrations of specific companies that have made a contribution to NATO security in your infrastructure? In the elec- tronics field, for example? It is difficult for me to name them all because I do not have with me a list of those firms that supply the technical knowledge. Offhand, I would mention General Electric and ITT in the United States, the big elec- tronics firms in Germany and Philips in the Netherlands. There are so many others which I cannot name now; I would have to study their various contributions. The shipbuilding industry, of course, is of immense importance for the Alliance. I may perhaps point out that without the combined ship- building facilities of the NATO Allies -such as the United Kingdom, France, Italy, and the Federal Re- public of Germany-it is doubtful whether the countries of Europe affairs. Approved For Release 2004/03/16 : CIA-RDP80M00165AO02500040027-5 Approved For Release 2004/03/16 : CIA-RDP80M00165AO02500040027-5 would have been willing, or even able, to build the modern warships which they now possess. lake a (,.ojntry like Holland: last year it contracted for well over $ t billion worth of vessels--twelve major war- !;h ps in Dutch shipping yards--- )utch-designed ships with all the rodern appliances. It is absolutely :-iuubtful, if not impossible. that those countries would have ordered these ships from the United States because part of the underlying mo- tive is to help their domestic ship- ping industries. So. you see, the nterrelationship is very big indeed. Could you say a few words, please, to describe how NATO is organized so that government and business can work effectively together? Oh. yes, we have a committee where the main representatives of the industries cooperate with the NATO directors--to streamline the various components of our defense posture and to make them as inter- operative as possible. And I may say that one of the weaknesses of NATO is the lack of interoperability, the lack of standardization. In recent years we have made progress. There is a political dialogue going on between the United States and Europe. This spring when I met the President of the United States, the Vice President, the Secretary of De- fense, the Secretary of State, and ot'ner officials, we all stressed the need to come to a real two-way street. It would be a weakness for the European allies to depend ex- clusively on American technology and weaponry, just as it would be well nigh impossible for the United States to become the monopolist in the Alliance. The United States can profit from our technical advances, too. There have been striking suc- cesses. One is the excellent main battle tank of the Federal Republic of Germany. the Leopard, which is now used in seven NATO nations. There is an agreement between the United States and the Federal Re- public of Germany that they should jointly develop a Leopard-type tank. Unfortunately, strong national lob- bies and interests make it, from time to time, rather difficult to carry out political decisions. But I am confi- dent that in this instance political leadership will prevail. Another good example is the F-16 plane now being offered by the United States to the Federal Republic of Germany, Belgium, the Nether- lands, Norway. Denmark, and some other countries. The form of the contract stipulates that quite a large part of the assemblage and/or the various components of the plane will be made in the countries which order them. I should add that this applies to other industries as well. For ex- ample, the Netherlands electronic industry has quite a large market in the United States, and has even built NATO Headquarters, Brussels. Belgium Mr. Secretary General, how can a strong viable Atlantic community help to build peace and security in other regions of the world? First of all, by the ever continuing process of consulting with each other and coming to consensus on world problems and on problems which lie outside the NATO area- like the Middle East and Africa. You have during the past year seen that. for reasons which I understand, the United States declined to give mili- tary assistance to Zaire, and the Eu- ropean countries intervened. But those were bilateral contacts. NATO. as such, does not intervene because we do not want NATO Allies criticized for intervening in other parts of the world. It is extremely important, however. that we consult on all mutual prob- lems-for instance, the Strategic Arms Limitations Talks (SALT). Nar- rowly viewed, that is a bilateral ques- tion; but it is a question on which Secretary Vance thought it wise to consult and brief the NATO Council Consequently, when the Soviets re- acted rather brusquely to U S. pro- posals, there were no complaints in the Atlantic Allied countries which otherwise might have voiced them because of lack of knowledge. Now we know that the proposals of the United States were eminently rea- sonable. NATO IN BRIEF* NATO ALLIES: Belgium, Canada, Denmark, France, Federal Republic of Germany, Greece, Iceland, Italy, Luxembourg, Netherlands, Norway, Portugal, Turkey, United Kingdom, United States. PURPOSE: "To preserve peace and international security, to promote stability and well-being in the North Atlantic area" as well as "to elimi- nate possible conflict in their (NATO Allies) international economic poli- cies and to encourage economic collaboration between their coun- tries. " Approved For Relee 2004/03/16 : CIA-RDP80M00165A042,.500040027-5 CORPORATE SECTION: What International Corporations Expect of Foreign Governments FIAT PERSPECTIVE: Global Vision of Development Giovanni Agnelli, Chairman NESTLE OBJECTIVE: Assisting Developing Countries Arthur Furer, Managing Director Newsweek NEWSWEEK PRIORITY: Free International Flow of Information Robert D. Campbell, Chairman of the Board and Publisher E VIEW FROM PULLMAN SWINDELL: Meeting Mutual Expectations 42 Donald E. Stingel, Former President EX:E:1R,0X] ;XEROX GOAL: Establishing Long-Term Relationships 45 C. Peter McColough, Chairman and CEO 34 Approved For Release 2004/03/16 : CIA-RDP80M00165AO02500040027-5 Approved For Relea 5A002500040027-5 FIAT PERSPECTIVE: Global Vision of Development by Giovanni Agnelli In the following statement, Mr. Agnelli evaluates today's increasingly explosive global situation, and the "compelling need" for world planning. More specifically, he: ? Designates the MNC as "one of the most valuable vehicles" in managing global demand. ? Cautions that rich and poor nations alike will suffer if they fail to utilize resources and to develop new global industrial plans. ? Reveals Fiat's flexible investment policy of matching its own initiatives with a host country's actual needs and development priorities. ? Discusses Fiat's commitment to maintaining a "global vision" among all nations in order to pro- mote industrial cooperation. M ankind has become con- scious of limited resources and the globalization of hu- man needs. The shrinkage of space, due to technological advances, has caused local tensions and problems to change quickly into world strains and issues. Indeed, the slowdown in growth and the questioning of the very no- tion of growth have had their locus in the industrialized countries of the West. But the shock wave has hit with no less violence the Eastern European countries and has dramati- GIOVANNI AGNELLI has held the post of Chairman of Fiat S.p.A. since 1966. In ad- dition, he served as Chairman of the Italian Manufacturers Confederation (Confin- dustria) from 1974-76; and he has been serving as Mayor of Villar Perosa (near Turin) since 1945. His international activi- lies include memberships on the Inter- national Committee of the Chase Man- hattan Bank, the Board of Advisors of the International Management and Develop- ment Institute and the International In- dustrial Conference of San Francisco. He is also Governor of the Atlantic Institute for International Affairs. Mr. Agnelli is an author and lecturer on domestic and in- ternational economic topics. cally hurt the Third World. Third World countries-except for the few fortunate owners of raw materials- see their take-off prospects and their hopes of exorcising the ghost of star- vation waning away. The mounting tide of worldwide unfulfilled expectations gives rise to increasingly radical ideologies, thus fostering dangerous social and polit- ical instabilities, which ever more pervade economic rationality. Even the legitimacy of economic rationality is being questioned. Disillusionment and wrath spread everywhere. Unforeseen solidarities and convergence of targets weld lo- cal and national terrorism into infer- national plots. Violence focuses on established institutions and on MNCs in particular, the latter being per- ceived as mainly responsible for economic crises and lack of growth. This should be no occasion for surprise. At crucial turning points, when things go bad, there is always a scapegoat at which all charges are levelled. Now it is the turn of the multinational corporations (MNCs). A world inundated by unrest and unfulfilled expectations, a world which by the end of the century will have some seven billion mouths to feed, is like an immense escalator where everybody stands, and yet even to stand still one has to keep moving. Zero growth-meaning that anything which does expand does so at the expense of something else-is an unbelievably explosive situation because worldwide demand is ex- ploding in quality and in quantity. What can save us is, on the one hand, to prevent any productive re- source from stagnating and, on the other, to try to work out new global industrial plans to meet with the in- creasing global demand. We live in a transition stage be- tween an international economy and a world economy, simultaneously encompassing both the age-old dis- tribution pattern of production fac- tors and the physical dislocation of production and value centers. And if we are unable to manage this tran- sition process, or rationalize it at its best, the whole world will collapse- dragging all of us down, rich and poor alike. Somebody, perhaps, may have the meager satisfaction of that tramp who starved on the mattress under which he had hidden a hoard of gold. Need for World Planning There is a compelling need for world planning that permits the best circulation and utilization of all re- sources available-technological, human and financial. At present, however, the suitable political structures at the world level are lacking. We can see that attempts to enlarge and strengthen them are resisted by a revival of economic na- tionalism and protectionism. But we fail to realize that planetarization of needs and expectations has already crossed over national and regional borders, and that no sanitary cordon can isolate anybody from the outside world. Role of MNCs This is the proper context for un- derstanding any and every role of the MNCs. Actually, MNCs have so Approved For Release 2004/03/16 : CIA-RDP80M00165AO02500040027-5 35 Approved For Release 2004/03/16 : CIA-RDP80M00165AO02500040027-5 far exhibited the frame of mind of the world economy. Indeed, they have behaved as if they were actually liv- ing in the climate of a world economy system. It is from this philosophy that their achievements and, initially, their failures have been derived. One cannot deny that MNCs are one of the most valuable vehicles for circulating managerial skills, tech- nology and marketing at the world level. They are a kind of "clearing- house" to help Third World countries fulfill age-old needs and new expec- tations. MNCs, when sticking to their role, are already the operating sym- bol and the only actual reality of the world economy. But just when there is a great need for the utilization and distribution of production factors, there is a weakening of the MNCs' dy- namics for expanding internationally. Some schools of thought already foresee a threatening storm of con- flicts brewing over the relationships between nation-states and MNCs- and this at a time when increased conflicts between nation-states and MNCs will ultimately translate into increased wastes at a world level. Harnessing the Multiplier We are all aware that economic conflicts between nation-states re- sult in wastes. We should not forget that unsound competition between MNCs on unsound projects is equally wasteful. At this point we should speak of interdependence. Apart from any semantic definition, inter- dependence essentially means this: or a worldwide basis, expectations multiply expectations, needs multiply needs, wastes multiply wastes. Clearly, all the actors in the world arena-nation-states, political forces, MNCs, and representatives of social forces-are already immersed up to their necks in the tide of this malevo- lent multiplier. There is no need to bother with in- tellectuals and anthropologists to know all this. It is enough to listen to a textile worker of a small Italian town, who knows he has to defend his own job against the competition of a worker from Hong Kong. Therefore, all responsible oper- ators should make every effort to get out of this malevolent multiplier and start thinking about how and where they can lay the foundations for op- erative mediation at the international level-an operative mediation within which the various competing interests can find balanced satisfactions through a self-regulating code. This does not mean that the natural aggressiveness of competition should be checked. Rather, this means that it should be harnessed and given its head, but not up to the point of changing a constructive force to one that effects a net destruction of global resources. Need to Learn from Past Mistakes I do not want to appear to gambol on the grass of heavenly pastures so as to avoid the stumbling terrain of earthly fields. To the contrary, my vision springs out of my day-to-day real-life experiences gained as chair- man of an MNC, and particularly of an Italian MNC. Indeed, it deals with two sorts of experiences that cannot be separated from each other. Italy, with her rapid and tumultuous growth, has become a rather anoma- lous Western country. In Italy we can see coexisting, side by side, the most developed underdevelopment, the weakest industrialized West and the most Communistic East. It is a coun- try where contradictions, delays, an- ticipations, and wastes represent an actual cross-section of today's world reality. So recent is the development of Italy that, in recalling past feats, one still feels the smarting burns of past mistakes. When, as a representative of the international business com- munity, I am faced with proposals or choices regarding the future of a de- veloping country, I often feel that I must be scrupulous about avoiding some of the mistakes we made in Italy. My generation of economic op- erators has witnessed in the under- developed South the building up of isolated industrial plants and sparse infrastructures which now are filed under the label "cathedrals in the desert." Today I am supposed to make a kind of balanced judgment about whether Fiat should expand its oper- ations into new countries, and in particular into Third World countries. In this connection, I will only say that through its operations, Fiat has gained a reliable image as a transna- tional corporation. This is confirmed by the fact that, in the last few years, my corporation has received in- creased demands to come in and set up operations, especially from de- veloping countries. I would say that the guidelines for our operations abroad are flexibility and rationality, on the condition that excessive flexibility does not preju- dice rationality itself. We often try to match our initia- tives with the actual needs of the host country on the basis of its stage of development and by taking into ac- count its plans and priorities. Where concrete opportunities ex- ist, we also seek to give a positive contribution to the national balance of payments through financial ar- rangements with local capital. The types of participation range over a wide gamut, from total stock owner- ship to joint ventures of various styles, from significant equity partici- pations to coproduction agreements or turnkey combinations of plant and know-how. In all these contexts, we try to in- volve existing entrepreneurship or stimulate the rise of new initiatives. The creation of local entrepreneurial talents is one of the most important functions MNCs are called on to per- form. Actually, the problem is to in- duce the economic operators of host countries to be ever more technically and industrially minded, thus en- abling them to walk by themselves with no chaperonage at all. Need for Realistic Decisions We are fully conscious in our op- erations of the need for a global vi- sion of development, and we seek to convey the same vision to our part- ners. Thus having "world conscious- ness" of the issues at stake, MNCs should also speak their minds on the adequacy and feasibility of a coun- try's development plans. Multinationals must have the cour- age to say "no" when there are not suitable conditions of a positive na- ture to start the type of collaboration required. The image of an MNC is built on facts, but it is also based on the capacity and opportunity to re- fuse projects which are illusory solu- tions for the real possibilities of a country, and which are likely to add to worldwide wastes. When refusals are motivated by such economic and financial con- siderations, the corporation has a duty to put them forward. As a result, many questions may arise. Are there valid conditions to initiate the type of industrial cooperation requested? 36 Approved For Release 2004/03/16 : CIA-RDP80M00165A002500040027-5 Approved For Release 2004/03/16 : CIA-RDP80M00165A002500040027-5 Are there the proper infrastructures and economies of scale to meet the relevant targets? Further, on the fi- naucial plane, are the necessary fi- nancing sources available? From their past experience. MNCs have accumulated sufficient reasons Ic legitimately say "no. But a ''no" "rum a single MNC is not always rrrough to cause a project to be re- .iised or put aside. Unfortunately, rl,ore still remain those forms of un- 7ound competition which I men- tioned earlier. That kind of compet - lion is unsound just because it 'Tinges on unsound projects. Fiat's Operating Principles Ai the moment. Fiat Corporation hers no written code of conduct. Our code of conduct is to be found in our operations. I could add that our operations so far are in full accord with the recent codes of conduct worked out by responsible interna- tional bodies. This code of ours, based on facts, should ensure that our behavior is proper. The quality of the behavior of an in- dividual MNC towards nation-states may be sufficient to solve "moral" issues. But the solution of moral is- sues alone is not enough. What is most needed is a global rationality which would provide guidelines for all the actors on the world scene. We have already reached the point of opening a 'grand debate' be- tween the responsible leaders of nation-states and the representatives of MNCs. However. one must go be- yond that, one must find the suitable spot where the dialogue may be in- stitutionalized and where the repre- sentatives of social forces are also involved. "There is a compelling need for world planning that permits the best circulation and utilization of all resources available.. . .'" Approved For Release 2004/03/16 : CIA-RDP80M00165A002500040027-5 Approved For Rele 00 65A002500040027-5 NESTLE OBJECTIVE: Assisting Developing Countries by Arthur Furer For more than half a century, the Nestle "industrial adventure" in developing countries has been a viable business experience because, as Dr. Furer reveals, Nestle: ? Looks beyond the company's need for a reasonable rate of return on investment and responds to socioeconomic needs of the host country. ? Builds factories in rural areas-"the first link in a chain of activities which all contribute to the economic and social development of a region." ? Integrates "totally" into the host country while contributing to the industrialization of that country. ? Provides industries which help to fulfill short-term and long-term development goals of host countries. I t is now more than 55 years since Nestle started its adventure in the developing countries. It was in Brazil in 1921 that Nestle manufac- tured condensed milk in a develop- ing country for the first time. Like all the other Latin American countries, Brazil was a far-off land where people still went to make their fortunes. The jcurney from Switzerland to Brazil lasted many weeks; it was often quite an experience. This venture in Brazil was followed by many others in Latin America, and then later in Africa and Asia. Today 89 factories all over the ARTHUR FURER is Managing Direc- tor of Nestle S.A., a company with an es- tablished international reputation. Be- fore beginning his nearly 25 years of ser- vice to Nestle, he held positions as attor- ney and legal adviser to Swiss steel and machine companies. Dr. Furer is on the Board of Directors of the Swiss National Bank, is a member of the Federal Com- mission for Trade Policy and serves on the boards of several Swiss economic organizations. Third World manufacture annually 980,000 metric tons of Nestle prod- ucts, i.e., about 23 percent of the total output of all the factories man- ufacturing our products in the world. These companies in the developing countries employ a total of 35,700 people. In the course of our long and ex- tensive experience in these countries, we have often asked ourselves: What can a multinational company do to assist the developing countries? The word "assist" should be understood in the sense of "participate in the development of," since a company which works in a foreign country does not go there primarily to "as- sist" but, of course, to develop its own business and to obtain a rea- sonable return on the capital and effort invested there. For the activity of a multinational in a host country to be viable, however, there must also be benefits for that country: both immediate economic benefits, such as the replacement of imports by local manufacture, and indirect benefits of a less spectacular nature, i.e., the socioeconomic effects of the setting-up of a factory, which are less obvious but extremely important for the development of the country. Multiplier Effects of Building a Factory The most valuable assistance a multinational can give to a develop- ing country is the building of a fac- tory which will provide jobs and regu- lar salaries and thus give security to the families of workers and em- ployees. The establishment of a fac- tory is the first link in a chain of ac- tivities which all contribute-directly or indirectly-to the economic and social development of a region. Take, for example, what happens when Nestle decides to build a milk prod- ucts factory in a rural area of a de- veloping country. First of all, the building of a factory puts the architects and engineers of the company in close collaboration with those of the country. Nestle supplies its knowledge and its ex- perience of the requirements of the food industry acquired in numerous other countries. The local engineers and architects supply their knowl- edge of the region and local cus- toms and their contacts with the building companies of the region. The work given to the local archi- tects, engineers and building com- panies is considerable. Nestle's ex- perience and requirements contrib- ute to improving the knowledge of the local experts. This new knowl- edge often later benefits national enterprises, and this is the first of the indirect benefits. The decision to build the factory makes it necessary, once the ap- proval of the authorities is obtained, to provide the appropriate infrastruc- ture: roads, electricity, water and so on. All these services benefit the population of the region and improve their standard of living. While the factory is under con- struction, its future supply of fresh milk must be assured. The local farmers must therefore be convinced of the advantages of modern tech- niques of milk production, and they must be educated in the basic prin- ciples of hygiene which contribute 38 Approved For Release 2004/03/16 : CIA-RDP80M00165AO02500040027-5 Nestle representative provides farm technical advice to local dairy farmer. to improving the quality of the milk. The farmer is taught to take care of his cattle, to feed them properly and to plan the growing of fodder crops arid the construction of silos for the conservation of fodder. This as- sistance to the milk producer from veterinaries and agronomists goes on without interruption as long as the factory operates. The experience acquired by the farmer is of per- manent value to him and may be used in other national industries, such as cheesemaking. which will subsequently be established in the region. Frequently, the new techniques and the resulting high-quality milk benefit the populations of the nearby towns which draw their supply of fresh milk from the milk district. These are indirect benefits resulting from the development of the milk district. The most important direct benefit is the guarantee given to the farmer that all his milk will be bought by the factory at a fair price. This means security for him. The money he earns enables him to buy more cattle and to improve his standard of living. Helping National Industries Grow Staff is needed to manage the factory: foremen, head mechanics, electricians, accountants. All these employees are trained by the com- pany and learn the most advanced techniques. This training already starts when the factory is being built. It continues in the factory itself and in specialized centers in the country and overseas. Each employee has the chance to improve his position. Inevitably, some executives leave the company to work in national companies, which thus profit from the experience and training acquired in our factory. Here is a further in- di'ect benefit which contributes to the industrialization of the country. As soon as possible, the manager of the factory, who is usually an ex- patriate in the beginning, is replaced by a host national. On the basis of our long experience, we believe that a foreign company which establishes itself in a host country must inte- grate itself totally into the country and employ, whenever possible, lo- cal people in key posts. The milk districts are vast, often extending around the factory in a radius of more than 200 kilometers. There are many milk producers. In order to collect the milk and deliver it daily to the factory, the "milk route" is created. Local transport companies develop-enormously as a result. New jobs are made available. For these companies and their work- ers, the presence of the factory is a guarantee of work and of regular payment. Here again is a community of interests. The factory needs the transporters and the transporters would not exist without the factory. The factory also contributes to the development of other national in- dustries such as the manufacture of tins, cases, cartons, and printed labels-creating new jobs and work. All these companies must meet very high standards and, whenever neces- sary, Nestle assists them with advice based on experience gained in our countless contacts with similar en- terprises in other countries, both in- dustrialized and developing. This contribution of technology, which may be considered as indirect, is in fact permanent and becomes ex- tremely important: it benefits other national industries that use the ser- vices of these same companies. Also Many Indirect Benefits The new factory is often the center around which a whole region de- velops: the living standards of the population increase and educational facilities can be improved. Taxes are paid to the community not only by the factory but also by the other companies servicing the factory and by the milk producers and employees of the factory. The community is able to build schools, as well as provide drainage, an efficient water supply and electricity. The economic cycle is in motion. But the indirect benefits do not stop there. The milk products from the factory must be sold. A commer- cial and administrative organization must be created to deal with the de- velopment of sales in the whole country. This again means jobs, training of personnel and commer- cial and administrative executives in the techniques of management- executives who can reach the key posts of the company. The products must be transported all over the country. Again the trans- port companies find their business increasing and the same applies to wholesalers and retailers. These benefits extend way beyond the re- gion of the factory, to many parts of the country. The creation of a factory for the local manufacture of a Nestle prod- uct is very often the beginning of a whole industrial adventure. As other products are added to the range manufactured by the factory, this ex- tends the direct and indirect benefits already mentioned. When the pro- duction of the milk district reaches maximum capacity, or when other national industries establish them- selves and the increased population must be supplied with fresh milk, the factory can no longer increase its production. Thus, to satisfy the grow- ing demand for tinned milk, a second factory must be built farther away and a new milk district created. A new region will be opened to de- velopment. After these long years of experi- ence, I believe that it is: ? thanks to this philosophy of creat- ing factories which transform local raw materials in these countries, ? thanks to our willingness to inte- grate totally into the economic and social life of the country, and ? thanks especially to the fact that the development of our industry is in the interests of the host country, that Nestle has been able to be so active in these countries and thus participate to a modest extent in their development. Approved For Release 2004/03/16 : CIA-RDP80M00165A002500040027-5 39 Approved For Re INewsweeki A0Q2500040027-5 NEWSWEEK PRIORITY: Free International Flow of Information by Robert D. Campbell Mr. Campbell believes that the international flow of news is vital to "the functioning of today's in- creasingly interdependent world." He emphasizes that: ? His company operates overseas not only to make maximum use of its resources but also to fulfill a special responsibility-providing accurate knowledge on a global basis. ? Newsweek brings unique, intangible benefits to countries overseas-providing decision-makers and concerned citizens with "reliable, disinterested reporting and analysis of events." ? In order to perform its informational function Newsweek requires freedom to cover the news, freedom from government dictates and freedom to circulate its product. ? The economic, technological and social benefits of a freer international flow of information will ultimately prevail over attempts in some areas to constrain it. I am always a little startled when- ever I hear someone refer to Newsweek, Inc. as a multina- tional corporation. We have operated on an international basis for so long --long before the term "multinational corporation" was coined-that we tend to regard it as a normal condi- tion of business life. The fact that Newsweek, in one form or another, circulates in 156 countries and terri- tories, is printed in four continents and has business or editorial offices ire 33 different nations is so much a part of our daily consciousness that it no longer strikes us as in any way remarkable. This is not to say we take our mul- tinational role casually. In recent years we have put more emphasis than ever on our international opera- tions. Our two newest editorial ven- tures-the separately edited Inter- national Edition which we launched four years ago and the year-old New Product and Processes Newsletter- were specifically designed to serve the needs and interests of non- American readers. Substantial sums of money and a significant percent- age of our editorial staff have been committed to these ventures, and we have every intention of continuing to expand the size and number of our internationally oriented enter- prises. Special Responsibilities Why do we devote so significant a portion of our human and financial resources to markets outside the United States? The primary answer is the obvious one: to enhance our profitability by making the best use of our resources. Like so many other corporations, American, European and Japanese, we have concluded that if we were to concentrate ex- clusively on a single national market, however large, we could not hope to realize our full growth potential. Specifically, we have recognized that we are one of a relative handful of publishing organizations with the editorial, managerial and marketing capabilities needed to handle truly international operations; and that only by maximizing our international involvement can we achieve the full- est utilization of those capabilities. But profitability through maximum utilization of resources, important as that is, is not the whole story. For al- though it cannot survive without business management, a publishing company is different from most other businesses. Without being pompous or self-righteous, we at Newsweek feel that being in the communica- tions business imposes special re- sponsibilities on us. It is not enough for us to make and merchandise a desirable and reliable product in the most profitable markets we can find. Our product is information-a commodity whose accurate and timely exchange is vital to the func- tioning of today's increasingly inter- dependent world. And since News- week is one of a very few communi- cations organizations with the re- sources to report in depth on de- velopments all around the globe, we do not believe that it would be re- sponsible for us to use those re- sources solely for the benefit of any single audience. As we see it, our obligation to help keep our readers in Manila informed of what is happening in Madrid is just as great as our obligation to keep readers in Albuquerque informed of what is happening in Atlanta. Inevitably, this role as one of the major international conduits of infor- mation directly affects Newsweek's position on the kind of treatment that it has a right to expect from ROBERT D. CAMPBELL is Chairman of the Board and Publisher of Newsweek, Inc. He is also a Director of the Wash- ington Post Company, of which News- week is a division. During his years with Newsweek, Mr: Campbell has held posi- tions as West Coast Advertising Manager, U.S. Advertising Director, Publisher of Newsweek International, Executive Vice President, and President. A veteran fighter pilot of World War II and an experienced jet pilot, he holds the rank of Brigadier General, U.S.A.F.R. 40 Approved For Release 2004/03/16 : CIA-RDP80M00165AO02500040027-5 Approved For Release 2004/03/16 : CIA-RDP80M0&165A002500040027-5 national governments around the world. And it also gives a unique dimension to the benefits we bring to the countries in which we operate. Providing Accurate Knowledge Globally In purely economic terms, what Newsweek wants of the countries in which it does business does not dif- fer significantly from that of other multinational corporations. Access to the market on a fair basis, a realis- tic currency exchange rate, the right to repatriate profit--these and other such prerequisites for successful business operation are as vital to us as to anyone else. Similarly, the tangible benefits which we bring to the countries in which we operate are relatively con- ventional. In Australia, to take just one example, we are directly respon- sible, between our editorial opera- tion and our business office and printing works, for the employment of some 70 people. And as a major advertising medium our indirect con- tribution to employment levels, while unquantifiable, is surely very large. By helping Sweden to sell goods and services in Singapore-and vice versa-we contribute significantly to the economies of both countries. And the same thing applies to dozens of other nations. But, as I pointed out earlier, there is a unique, if intangible, set of bene- fits which we bring to the countries in which we do business-and even to countries in which we merely circu- late. A society run by men without accurate knowledge of develop- ments elsewhere in the world is a doomed society. Even in those coun- tries where the local press has been reduced to a mere propaganda vehi- cle, the top decision-makers must have access to reliable, disinterested reporting and analysis of events in the outside world. (If anyone needs evidence that this is the case, it can be found in the fact that each week 330 subscription copies of News- week International go to Moscow and 120 more to Peking.) In many free or relatively free so- cieties outside the United States, Newsweek performs an even more important role: it supplies politicians, businessmen, professional people and just plain concerned citizens with a depth of information on the international scene which their local media, for lack of globe-girding re- sources, often cannot supply. Optimum Climate for Reporting In order to perform this function, however, Newsweek must have an operational climate quite different from that required by the ordinary manufacturing or marketing com- pany. First and foremost, we must have the freedom to cover the news. We cannot keep the people of Japan informed on what is happening in Ja- karta if we are not permitted to send a correspondent to Indonesia. Simi- larly, we could not give our readers an accurate picture of developments in the Third World if, as has been loudly urged at a recent series of UNESCO meetings, our only source of information on those develop- ments consisted of government propaganda purveyed by a so-called Third World News Service. Our second requirement for suc- cessful operation is closely related to the first. Newsweek cannot func- tion properly as a conduit of accu- rate, disinterested information if in- dividual governments attempt to dic- tate what we may and may not print. Indeed, it is precisely the fact that many governments do, in greater or lesser degree, impose such dictates on their own press that makes the local media in large parts of the world at best a highly distorted mirror of reality. Finally, Newsweek cannot fully per- form its informational function where national governments deny most of their citizens the freedom to read us. Fortunately, this is not a common occurrence outside the Communist world. At the moment, in fact, there is only one non-Communist state- Uganda-that consistently refuses to let Newsweek circulate within its bor- ders. But periodic banning or exci- sion of unwelcome articles is rea- sonably frequent in a number of avowedly democratic societies. Let me make it clear that as a mul- tinational corporation Newsweek, Inc. is keenly conscious of the many very real and legitimate differences between nations in customs, atti- tudes and behavior patterns. Our editors and managers will never wittingly offend such legitimate sen- sibilities. Nor does Newsweek con- sider itself in any sense above the law, we ask no immunity from the laws of libel or from the normal legal constraints upon the publication of false and damaging reports. And even where no legal offense is in- volved, our editors are always ready to hear arguments that they have done a person or an institution injus- tice and, if persuaded, to make pub- lic amends. In short, Newsweek accepts that, like all human institutions, it is falli- ble and capable of improvement. What we cannot accept is the right of any government or political body to try to convert Newsweek into an in- strument of its will or to silence the magazine because it has reported facts that someone finds unpalat- able. Optimism over Freer Flow of News The conditions I have just out- lined are, in a sense, modest. They are the minimum required not only for the operation of Newsweek but for the operation of any responsible organ of information and opinion. Despite that fact, they are by no means universally accepted, and in recent months a number of con- cerned observers have voiced the pessimistic suggestion that con- straints on the international flow of news are certain to become increas- ingly widespread-particularly in the developing countries. It is not hard to find justification for such fears, but, for all that, I remain an optimist on this issue. There is, it seems to me, a strong parallel between international dis- semination of information and the in- ternationalization of commerce that has taken place since World War II. Undeniably, there have been numer- ous ups and downs-and occasional rude setbacks-in the development of a more integrated world economic order. But, on balance, the eco- nomic benefits inherent in a freer flow of trade and capital have pre- vailed over national rivalries and ideological mistrust. By the same token, I am convinced that the eco- nomic, technological and social benefits of a freer flow of informa- tion will also ultimately prevail.* "A society run by men without accurate knowledge of developments elsewhere in the world is a doomed society." 41 Approved For Release 2004/03/16 : CIA-RDP80M00165AO02500040027-5 Approved For Re r-4,00611 4/ /116: ;I - D 8r0~ 00 AGG2500040027-5 Swirl VIEW FROM PULLMAN SWINDELL: Meeting Mutual Expectations by Donald E. Stingel Teamwork-by both the corporation and the host government-is essential to the successful and efficient completion of overseas projects. Mr. Stingel, now an international business consultant, bases his comments upon his recent experience as President of an international engineering corporation. He notes the following: ? Early professional engineering advice can help a government with project planning, making it both practical and realizable from the very beginning. ? Upholding "reasonable and clearly justifiable contract demands" is an imperative for both parties concerned. ? An engineering corporation can only operate in a climate that permits it to make a reasonable profit and to have the full cooperation and active assistance of the host government. ? "Once this need for teamwork is met by corporation and client alike, the foreign government can become an excellent and repeat customer for the technology that it seeks." IR ullman Swindel, based in Pitts- burgh, Pennsylvania, is deeply involved in the worldwide trans- fer of technology related to its know- how in the steel, foundry, ceramic, mining, and minerals industries, as well as in the public works sector. We are engineers, consultants, technical advisors, and constructors of plants in many countries of the world. Through long years of experi- DONALD E. STINGEL, now an interna- tional business consultant, served as President of the engineering company Pullman Swindell from 1973 until his recent retirement in 1977. In addition to his career at Pullman Swindell, Mr. S:ingel's occupational background in- cludes senior-level managerial positions in both Union Carbide and Airco Corpora- tion. Among his numerous affiliations, Mr. S:ingel is the Vice Chairman of the Com- merce Department's Committee on East- West Trade, a member of its Advisory Committee on Multilateral Trade Negotia- tions and a representative on the U.S.- Egypt Trade Council. ence we have built our overseas business to a level where the great majority of our employees are en- gaged in work for foreign countries themselves or quasi-government en- tities in those countries. Mutual Benefits and Respect Our business is based on mutual trust and respect far beyond mere words in a contract or agreement of understanding. Rapport and respect are the keynotes of our relationships with our customers. The benefits to Pullman Swindell have been many, not the least of which have been increased employ- ment, higher profits and establish- ment of a reputation for good work performed in many parts of the world. The benefits to our host coun- tries have also been very positive- efficiently operating plants and fa- cilities of latest design brought on stream within a reasonable time and within budget to add materially to the economy of those countries. These nations range from the Soviet Union, Poland and Yugoslavia in the Eastern bloc; to Zambia, Sudan, Algeria, South Africa, and Egypt in Africa; Iraq, Iran, Indonesia, India, Japan, Australia, Saudi Arabia, and Malaysia in the Eastern Hemisphere; and prac- tically all the countries of Central and South America. Case History of Investment Our experience in dealing with for- eign countries is similar to that of many other international engineering corporations, both U.S. and foreign based. When we first do work for a for- eign government, we initially become a party to some type of formal agree- ment, however brief, whose fulfill- ment will help that government in its planning toward the realization of a basic part of its short-term or long- range objectives for industrial de- velopment and growth. Usually we are involved in initial feasibility studies concerning poten- tial industrial plant facilities such as a steel mill, an iron foundry, a ceramic brick plant, or a public works project such as a railroad. In turn, these studies often lead into longer-term construction-engineer- ing contracts to enable the actual building of the plant or project proven practical and desirable dur- ing the feasibility study phases. Sometimes we are chosen as turn- key contractors for a given project, and in such cases our responsibili- ties go well beyond the preparation and implementation of engineering drawings. As a turnkey contractor working in a foreign country, we not only become involved in the com- plete engineering and construction of a plant, but also become directly responsible for the technical training of foreign nationals, both in the host country and in the United States, as well as assisting in the start-up and commissioning phases, turning over to our governmental customer a completely viable industrial opera- tion. 42 Approved For Release 2004/03/16 : CIA-RDP80M00165AO02500040027-5 Approved For Release 2004/03/16 : CIA-RDP80M00465A002500040027-5 Need for Realistic Planning Naturally, in any business dealings between a U.S. international corpo- ration and a foreign government, the corporation must be permitted to make a reasonable profit. Any agree- ment negotiated between a foreign government and the corporation must be negotiated in a climate of mutual understanding and business respect, with the realization that the corporation must make a profit to exist. Particularly in those countries where there are few trained and ex- perienced engineering technicians, it is essential that those governments engage outside professional engi- neering organizations to advise and assist in discussions and negotia- tions for new facilities. If this is not done, it becomes next to impossi- ble for that government customer to arrive at a mutually understandable and clear-cut plan and an agree- ment with a U.S. or foreign corpora- tion for the realization of a given major project. Our usual experience is that the government of such a country wants a new facility-for example, a new, completely integrated steel mill to make a wide variety of products- but has no idea of the true cost or complexity of such a project. Early professional engineering advice will help this inexperienced government plan the project so as not only to be practical and realizable from an ini- tial size and investment standpoint but also to enable later expansion at minimum cost when such expansion is truly needed. Many major projects originally announced by developing countries have bogged down be- cause they are poorly planned as to size, makeup and product line. The investment required soon outruns ';he available funds to construct the project, so many such projects never become a reality. After such chaotic experiences many foreign governments, espe- cially those in the developing nations, are hiring engineering consultants and technical advisors, either from the United States or from other highly developed nations, to help in project planning so that major ex- penditures for plant facilities can be fully justified both from an invest- ment payback and an end-use need standpoint. We have recently entered the bid- ding on an extremely large steel complex in Africa that probably will become one of the most compre- hensive turnkey-type projects ever attempted. The international consor- tium eventually awarded the total responsibility for this project will design, engineer and construct the entire industrial complex, and will be responsible for the total process flow as well as installation of all the necessary equipment. In addition, the turnkey contractor will provide certain of the raw materials for a given period of time, ensure attain- ment of production goals and dis- pose of a portion of the production itself for many months after start- up of the plant. There will be a vast program of training associated with this project. Prior to and during plant start-up, foreign nationals will receive ad- vanced comprehensive technical training over extended periods of time in the United States, or wherever the consortium is based, as well as in their own country. Further, the turnkey engineer-contractor will be responsible for the planning and construction of associated off-site structures and facilities-a social center complex, a medical center, administration buildings, sports arenas, and possibly housing for em- ployees and their families. Need for Reasonable Contract Demands Of course, the international engi- neering and construction entity ex- pects the foreign government to keep its contract demands reason- able and fully attainable. During negotiations with some official gov- ernment representatives of foreign trade organizations, it is apparent that they are convinced that any cor- poration or consortium must be ex- tremely wealthy. They believe that the businessman can afford any giv- en amount of added expense or penalties that the government may want to impose. These mistaken be- liefs often lead to demands that, from the contractor's side, eventu- ally go well beyond the intent of the written basic contractual obliga- tions signed in good faith between government and corporation or con- sortium. In the initial bid phase of a turnkey job, some foreign governments have imposed severe restrictions which have prevented many corporations from bidding because of excessive and potentially indefinite down- stream responsibilities. One exam- ple: a corporation may be forced to agree in advance to find project fi- nancing for a foreign government's project before initial engineering has determined the potential cost and scope of the project. This is particu- larly true in many of the less de- veloped countries where the sophis- tication of experience has not yet been reached. In many cases the poor credit ratings of some of the less developed nations discourage financing institutions from providing the backing required for what are, in fact, desperately needed projects. Foreign governments should rec- ognize that pre-engineering studies and proper estimates of scope and cost comprise only a small portion Approved For Release 2004/03/16 : CIA-RDP80M00165A002500040027-5 Approved For Release 2004/03/16 : CIA-RDP80M00165A0r02500040027-5 of the potential final cost. If such feasibility studies are performed completely independently of future financial commitments, the prepara- tory costs will not only eventually save money in total project invest- ments, but will also make the inter- national corporation less wary of bidding. In the engineering-contracting business, even beyond the need for reasonable and clearly justifiable contract demands, we expect the foreign government to understand and accept that, as part of our nor- mal code of business ethics, we do our work in the best possible manner and in the shortest practical time, and do not resort to bribery or other such forms of coercion. Otherwise, from a practical standpoint, our reputation would be quickly tar- nished and our ability to earn profits reduced. We also must agree that it is in the best interests of the govern- ment entity to get its project into to- tal operation quickly in order to get a return on investment and put people to work as soon as possible. Need for Full Cooperation Once an agreement is signed be- tween the foreign government and the international corporation, there must be full cooperation. To ensure the smooth flow of work and attain- ment of goals on both sides, the in- ternational corporation expects the foreign government's active assis- tance in implementing the project. Burdensome bureaucracy must not be allowed to cripple the intent so carefully stated in the contract be- tween the parties. In most cases, the government must establish a special project task force to assist the inter- national corporation in completing its work. Some of the responsibilities of such a governmental task force include the handling of problems re- lated to customs, delivery of goods and housing for the contractor's employees so that the contractor can concentrate on the project it- self. Costly delays are not uncommon at some foreign project sites due to a lack of cooperation between separate governmental ministries. For example, in one actual case in- ternational corporate personnel un- fortunately found themselves without adequate housing and other asso- ciated facilities because the ministry of housing of that country would not honor contractual agreements made through the ministry of indus- try. Early recognition of such prob- lems by authoritative government officials saves both time and money. As a foreign government's asso- ciation with the international cor- poration lengthens and expands, a high degree of continuity of respon- sibility should be maintained. Cor- porate personnel and government officials normally work closely to- gether to consummate the initial agreements. It would be best to con- tinue these same associations throughout the complete implemen- tation of the project for best results. However, sometimes we will deal ini- tially with a cooperative group of foreign government people in the preparation of a feasibility study, sign the contract and then work with a completely different and unfamiliar group of official representatives in the execution of the project. Particularly in the less developed countries, the host government must also be prepared in advance to deal with the cultural and economic shock that can result directly from a massive engineering and construc- tion project. Changes and disrup- tions in travel, working and living routines may ensue on short notice. The movement of personnel and shipment of equipment may over- whelm the country's transportation facilities, and new demands may strain various utilities systems be- yond their capacities. Case Example: Negotiating a Steel Mill I would like to refer to a specific project, as yet unrealized, in a de- veloping nation, as an example of international corporations working with host government entities. For nearly four years, Pullman Swindell and other international corporations invested untold time and money for preliminary engineering studies in an effort to pin down what the host government wanted in its proposed expansion of the basic steel indus- try. The government first chose as its objective a new, fully-integrated steel mill, and opened negotiations with international engineering corpora- tions for proposals. After many de- lays the host government then re- jected this plan in favor of further review and changes in direction, such as building only certain new elements rather than a whole new mill. This brought about new studies followed by further proposals. Many changes, revised proposals, and years later, still under official gov- ernmental review, plans for the pro- jected industrial expansion have re- turned to point zero-a new, fully- integrated steel mill. Need for Teamwork Returning to the main theme of the article (what governments and cor- porations must expect from each other), once a contract has been awarded by any foreign government to an international corporation, the government must then establish and maintain a continuously open line of communications with the corpora- tion. This is absolutely necessary to approve drawings, scope or process changes, and to settle day-to-day differences. Time-consuming and ex- pensive misunderstandings can be cut to a minimum when responsible people on each side, and with the proper approval authority, have ade- quate communications facilities and contacts at hand. There is no doubt that internation- al engineering-construction corpora- tions expect cooperation from their foreign governmental clients. With a new industrial facility as the end product, the unencumbered assis- tance of the foreign government's authoritative representatives is un- questionably a prime requirement of the engineer-contractor. Once this need for teamwork is met by cor- poration and client alike, the foreign government can become an excel- lent and repeat customer for the technology that it seeks. In turn, the international corporation can con- tinue to be a source of know-how to that government so that it can be- come ever more reliant on its own industrial base.M "Any agreement negotiated between a foreign government and the corporation must be negotiated in a climate of mutual understanding and business respect... 44 Approved For Release 2004/03/16 : CIA-RDP80M00165A002500040027-5 Approved For Relea,, la " _ 5AO02500040027-5 XEROX GOAL: Establishing Long-Term Relationships by C. Peter McColough When Xerox invests overseas, it does so with the expectation of establishing long-term mutually rewarding relationships with host countries. Mr. McColough points out that: ? A stable political climate and economic situation are important considerations in investment decisions and enable the company to take financial risks in developing innovative new products. ? It is mutually beneficial to host governments and to Xerox that the company be given "the oppor- tunity to comment upon, contribute toward and help influence basic change." ? Xerox contributes to world economic development by making technology available, employing people, educating them, paying taxes-and insisting that employees comply with a strict code of business ethics. ? Xerox asks for fair, consistent and equitable treatment from host governments. M uch can be gained from a frank exchange on the expec- tations of multinational cor- porations and the host nations in which they operate. Through such open dialogue, we can learn of one another's purposes, as well as one another's problems. Once that im- portant groundwork is firmly estab- lished, we share a clearer under- standing of what multinational busi- ness is all about, and how both C. PETER McCOLOUGH is Chairman. Chief Executive Officer and Chairman of the Executive Committee of Xerox Cor- poration. After receiving both legal and business degrees, Mr. McColough began a 23-year career in Xerox, which culmi- nated in his selection as Chief Executive Officer in 1968. He serves on the boards of Fuji Xerox Co., Ltd., (Japan), Rank Xerox Limited (England), Citibank N.A., and Citicorp, and is active on numerous business, educational, international, and civic organizations, among them the U.S./ U.S.S.R. Trade and Economic Council and the Overseas Development Council. governments and corporations alike can gain from a strong relationship. I am aware of the criticism leveled at MNCs-some of it justified. And yet as head of an organization whose world business operates in more than 100 countries, I firmly believe MNCs are an ideal vehicle through which modern nations can contrib- ute to constructive world develop- ment and to the well-being of them- selves and their national neighbors. Why is Xerox a multinational cor- poration? We must be, for a very compelling reason: ever since our earliest days, Xerox recognized that the market for copiers and duplica- tors was a world market. The need for information is no less in Europe or South America than it is in the United States. Political/Economic Stability Important Given the fact that our markets are worldwide, what constitutes a favor- able investment climate? I can state our approach to investment very simply. When we decide to invest in a particular country, we must base that decision on sound business judgment. Will we be able to get our investment back? Will we be allowed to earn a fair return on that invest- ment? Will we be able to remit rea- sonable profits? Obviously, when we see a stable political climate and a stable economic situation, we are more confident there will be oppor- tunity for us to earn a profit from our investment in that country; other- wise, we must be cautious. In any situation where the invest- ment of capital is at stake, an impor- tant consideration is one of cer- tainty: Will this government's cus- toms regulations be imposed upon us equitably? Is the rate of inflation such that eventual devaluation will reduce our anticipated return on in- vestment? Are tax policies consistent from one company to the next-from one year to the next? Too often, there is a failure to ap- preciate the importance of stability- a reasonable degree of business cer- tainty-to the establishment of a good investment climate. Without such stability, and hence without an expectation of earned profits, com- panies like Xerox will not see the prospect of deriving the resources needed to do the work they must do to grow. For example, we recently invested several hundreds of millions of dollars in a new product-the 9200 Duplicating System-before we got the first nickel back from anybody. We had to make this commitment years before bringing the product to the marketplace, and the expendi- tures extended over a decade or more. Without some stability in the markets we serve, we would be re- luctant to take the enormous finan- cial risks necessary to develop in- novative new products. My comments on these economic matters are fairly basic, and I prob- ably would have made many of the same comments ten years ago. But Approved For Release 2004/03/16 : CIA-RDP80M00165AO02500040027-5 45 Approved For Release 2004/03/16 : CIA-RDP80M00165A0.02500040027-5 today there are other issues con- fronting business and government that require attention and are more complex. Issues of Concern In the spirit of an open dialogue between spokesmen from both gov- ernment and business, I will com- ment on two issues which seem to me of greatest consequence. One issue is government interference; the other, worker participation. I am troubled by the specter of government interference, for it kills initiative-bit by bit by bit, in its sub- tle way. One of its most insidious as- pects is that it is self-sustaining. Gov- ernment interference usually results in more government interference. When things are not working very well, there is a strong tendency for some to say: "We have not yet done enough. Let us do some more." And with that, of course, the interference is increased-and the problem grows even worse. Before long, business could be rendered powerless to con- tribute to the economy and to grow. I realize that worker participation is a much-debated issue and I feel obliged to express my own views, even though they may well be con- trary to those of some of my friends and associates in Europe. As a can- did American, I will say that aspects of this movement worry me. Cer- tairily the voice of employees should be heard in the affairs of a company: intelligent people are any corpora- tion's principal asset. And yet I question employee representation on boards of directors-just as I question special interest representa- tion of any kind on the board of di- rectors. In my personal opinion, such actions are unquestionably well- meaning, but they misjudge the role of corporate boards of directors. My quarrel with all such special-interest actions is that they can work as a counterforce to corporate perfor- mance, and in the end deprive the marketplace of full corporate ser- vice. Having said that, let me add two comments: 1. Wherever in the world they live and work, Xerox employees are ex- pected to comply with the letter and spirit of the rules and laws of their country. We can tolerate no less. And-especially when the law relates to the conduct of our business-we have an obligation to make it work for the mutual benefit of all con- cerned. 2. The world's social order is changing, and it may be that new ways of managing an international business will be among the major changes. Government and business -no matter what their basic philo- sophical leanings-have a very seri- ous obligation to assure that any changes are for the common good. Changes should not be made precip- itously. I was pleased that recently at least four countries-Germany, Great Britain, Sweden, and the Netherlands-resisted efforts to pro- ceed too quickly in the area of "in- dustrial democracy." Change must be thoughtful, deliberate and evolu- tionary unless we are to make tragic mistakes that hurt all of us. I would hope that host countries will give us the opportunity to com- ment upon, contribute toward and help influence basic change. It is in our self-interest and the self-interest of the government that we do so. Case Example: Benefits to Host Countries What tangible benefits does a company like Xerox bring to its host countries? In addition to making important technology available to our customers in these countries, our main contributions can be stated in three sentences: We employ people. We educate them. We pay taxes. Let me take our operations in Latin America by way of illustration. Today there are some 9,000 Xerox people at work in Latin America; virtually all are nationals of the countries in which they are employed. The main job of each of those employees is to bring Xerox technology to their communities, and that is why educa- tion is so important. To be able to do their jobs, those Xerox people need to be trained in the ways JGe do business, and learn to understand the technology at the heart of our business. Just as in the United States, we need bright and aggressive sales and service personnel and, above all, managers, if we are to meet our ambitious goals. Perhaps one of the most important contributions we can make in Latin America is to de- velop a cadre of competent business managers. Over the past decade our operations in Latin America have ex- perienced good growth. Therefore we must train hundreds of new managers each year in a very com- plex business and technological en- vironment. Whether they stay with us-or go to other organizations as, of course, some do-we provide them with a skill of considerable value to themselves as well as to their country. When you consider that same situ- ation on a global scale, you can be- gin to see the truly major influence large multinational organizations can have on world development. In just our own case, for example, Xerox today is an organization of more than 100,000 people worldwide, each with the best training we know how to provide. Further, we insist that all of our people understand and comply with a strict code of business ethics. We are very emphatic about the conduct of our employees. I am convinced that basic morality is one of the most lasting contributions we can make to world economic development. Long-Term Relationships In turn, we feel it is fair to ask of our host countries that they apply consistent and equitable rules to us. We know there must be government regulations and restrictions-and we scrupulously abide by them. We do not seek favoritism, but we look to be treated fairly. Quite aside from the moral im- perative to do so, we know it is good business for us to try to be good citizens, to hire and train local peo- ple and to pay careful attention to each subsidiary's balance of pay- ments. We do these things because when we invest in any country in the world, we expect it to become a long-term relationship and mutually rewarding-to Xerox and to our host country. * 46 Approved For Release 2004/03/16 : CIA-RDP80M00165AO02500040027-5 Approved For Release 2004/03/16 : CIA-RDP80M00165AO02500040027-5 . MNCs are an ideal vehicle through which modern nations can contribute to constructive world development and to the well-being of themselves and their national neighbors." Approved For Release 2004/03/16 : CIA-RDP80M00165AO02500040027-5 Approved For Rel@Kse 2004/03/16 : CIA-RDP80M00165A94+2500040027-5 D1 The INTERNATIONAL MANAGEMENT AND DEVELOPMENT INSTITUTE (IMDI) is a nonprofit, educational Insti- tute headquartered in Washington, D.C. Its prime purpose is to strengthen corporate management teams Internationally through execu- tive seminars, management training, strategic planning, government- business programs, and publishing efforts on the international corpora- tion. IMDI is associated with a growing network of cooperating institutions in this country and overseas, including The Johns Hopkins School of Ad- vanced International Studies, Colum- bia University Graduate School of Business, Graduate School of Man- agement of the University of Califor- nia at Los Angeles, The George Wash- ington University, and the Fund for Multinational Management Educa- tion-plus 43 graduate schools and management centers in other nations. 2600 Virginia Avenue, N.W., Suite 905, Washington, D.C. 20037 Telephone: (202) 337-1022. Telex: IMDI 248698 48 Approved For Release 2004/03/16 : CIA-RDP80M00165AO02500040027-5 Approved For Release 2004/03/16: CIA-RDP80MOQ ? - ? - ? - ? ? ? - ???? ? - ? ? ? - ? ? ? . ? ? ? ? ? ? ? - ? I- ? - ? ? - ? ? Ann To: IN ff)("6Ii a fQAO&LifW T- SA~I~t~ P~Q~I~t~i 1 0~1(S7?DQQI~'~E 2600 Virginia Avenue, N.W. ? Suite 905 ? Washington, D.C. 20037 ATTN: Ms. Celestea Gentry (202) 337-1022 Please send me -copies of the Top Management Report on "Government-Business Cooperation in Meeting World Needs." ^ Check for postage and handling charges is enclosed.' 'There is no charge for the actual reports. Postage and handling charges are as follows: ? U.S., Canada, Mexico: $.60 per copy ? Foreign: $1.75 per copy Note: Copies requested will be sent by mail as "printed matter" (by air for foreign destinations) unless otherwise speci- fied on thiidrCfvLKIh~4;W1:Lsai5Lw4199716a~r~lAr1VPfdAd6I600040027-5 International Management and Development Institute Watergate Office Building, Suite 905 Approved For Release 2004/03/16 : CIA-RDP80M00165AO02500040027-5 2600 Virginia Avenue, N. W. Washington, D. C. 20037 Admiral Stansfield Turner JJ ; Director of Central Intelligence A Washington, D.C. 20505 PSN' NGTU U Ptl 1A i ~l~ y f Approved For Release 2004/03/16 : CIA-RDP80M00165AO02500040027-5 Directors? Hon. Dean l usk Honorary Chairman Gene E. Bradley President John S. R. Schoenfeld ,,~,A11M.pnegme Executive Vice President Hon. Theodore C. Achilles Vice Chmn., Atlantic Council Professor Edward C. Bursk Hon. Editor, Harvard Bus. Review Billy C. Christensen Vice Pres., IBM World Trade Europe/Middle East/Africa Corp. Gen. Lucius D. Clay, USA (Ret.) Henry R. Geyelin Pres., Council of Americas Walter E. Headley Exec. V.P., Bank of America Tom Killsfer Pres., U.S. Trust Co. of New York Dr. Antonia T. Knoppers Former Vice Chmn., Merck & Co. Dr. Alexander Lewis, Jr. Pres., Gulf Oil Foundation Hon. Paul W. McCracken Univ. of Michigan Hon. Lawrence C. McQuade Vice Pres., W. R. Grace & Co. H. E. Egidio Ortona Chmn., Honeywell Into. Systems Italia; former Amb, of Italy to U.S. Wylie S. Robson Exec. V.P., Eastman Kodak Reinaldo Scarpetta IMDI Director, Latin America Board of Advisors Giovanni Agnelli Pres., Fiat SPA Dr. Vernon R. Alden Chmn, Boston Co. Hon. Willis C. Armstrong U.S. Council, Int'l. CoC Robert W. Barnett Dir., Wash. Ctr., Asia Society Dr. Daniel Bendahan Pres., AVE, Caracas Frank Briceno Fortique Pres., Gerencia & Desarrollo, Caracas Hon. W. Randolph Burgess Vice Chmn., Atlantic Council John L. Caldwell Dir., Center for Int'l Bus. Relations, CoC of US John G. Crean Pres., Robert Crean & Co., Ltd. Philippe J. Dennis Reg. Dir., The Conference Board Southern Europe Lawrence A. Fox Vice Pres., NAM Hon. Bryce N. Harlow V.P., Procter & Gamble Co. Hon. Martin J. Hillenbrand Dir. Gen., Atlantic Inst., Paris Claire Giannini Hoffman Bertrand Hommey Patronat Francais, Paris Shigeo Hone Sr. Advisor, Bank of Tokyo, Ltd. Fisher Howe Dr. Herman Kahn Dir., Hudson Institute Ivan Lansberg Henriquez Pres., SEGUROSCA, Caracas Dr. J. Sterling Livingston Pres., Sterling Institute Carlos Llano Cifuentes IPADE, Mexico City Dr. Rodrigo Llorente Martinez Pres., CICYP, Bogota Mary P. Lord Atlantic Institute Thomas D. Lumpkin Pres., Gulf-Latin America Hon. George C. McGhee Tatsuzo Mizukami Pres., IMAJ, Tokyo Or. Clifford C. Nelson Pres., American Assembly Hon. Frederick E. Nolting, Jr. Hon. Frank Pace, Jr. Pres., IESC Dr. Aurelio Peccei Chmn., Italconsult Co., Rome John P. Phelps, Jr. Dir., Fund for For. Inv., Caracas Ch. Scrivener Sec'y of St. Consumer Affs., Paris Ralph E. Smiley Chinn., Booz, Allen & Hamilton Int'l Albert T. Sommers Sr. V.P. & Chief Economist The Conference Board Washington SyCip Manila, Philippines Hon. Alexander B. Trowbridge Vice Chinn., Allied Chemical Corp. Hon. John W. Tuthill Pres., The Salzburg Seminar Dr. Jose J. Urdaneta R. Pres., VECSA, Caracas Harold M. Williams Dean, Grad. Sch. of Mgt., UCLA Carl-Henrik Wingwist Sec'y Gen., Intl CoC, Paris Dr. Boris Yavitz Dean, Grad. Bus. Sch., Columbia U. Watergate Office Building-Suite 905 ? 2600 Virginia Avenue, NW Washington, D.C. 20037 ? Tel. (202) 337-1022 ? Telex: IMD1 64469 June 9, 1977 Admiral Stansfield Turner, U.S.N. Director of Central Intelligence Washington, D.C. 20505 I returned from Mexico City recently to find your June 3 letter with the fine news that you will be our honored dinner speaker for IMDI's December 5 Joint Council Quarterly Meeting. Since our June Joint Council Meeting was Monday evening, I took the opportunity to announce this to our corporate, government, and diplomatic associates. I know that they are looking forward with great pleasure to your joining them in December. We will be contacting your office with details as the date of the meeting draws nearer. Thanks again, Stan, and all best. ene E. Bradley P.S. On another subject, you might be interested in some impres- sions and highlights of the recent 35-day trip that Terry and I took together: see pages 2-6 of the enclosed m Approv&asFOP 1+ga~F-T"O%M3/46RkDpA,9Rbp169"4 do 30 ~02julies, the George Washington University and the Fund for Multinational Management Education. Directors Hon. Dean Rusk Honorary Chairman Gene E. Bradley President ntc~tF'~l~~neAaBpb$atitute John S. R. Schoenfeld Executive Vice President Hon. Theodore C. Achilles Vice Chmn., Atlantic Council Professor Edward C. Bursk Hon. Editor, Harvard Bus. Review Billy C. Christensen Vice Pres., IBM World Trade EuropelMiddle East/Africa Corp. Gen. Lucius D. Clay, USA (Ret.) Henry R. Goyelin Pres., Council of Americas Walter E. Hoadley Exec. V.P., Bank of America Tom Killefer Pres., U. S. Trust Co. of New York Dr. Antonia T. Knoppers Former Vice Chmn., Merck & Co. Dr. Alexander Lewis, Jr. Pres., Gulf Oil Foundation Hon. Paul W. McCracken Univ. of Michigan Hon. Lawrence C. McQuade Vice Pres., W. R. Grace & Co. H. E. Egidic Ortona Churn., Honeywell Info. Systems Italia; former Amb, of Italy to U.S. Wylie S. Robson Exec. V.P., Eastman Kodak Relnaldo Scarpetta 1MDl Director, Latin America Board of Advisors Giovanni Agnelli Pres., Fiat SPA Dr. Vernon R. Alden Chmn., Boston Co. Hon. Willis C. Armstrong U.S. Council, Int'l. CoC Robert W. Barnett Dir., Wash. Ctr., Asia Society Dr. Daniel Efendahan Pres., AVE, Caracas Frank Briceno Fortique Pres., Gerencia & Deserrollo, Caracas Hon. W. Randolph Burgess Vice Churn., Atlantic Council John L. Caldwell Dir., Center for Int'l Bus. Relations, CoC of US John G. Crean Pres., Robert Crean & Co., Ltd. Philippe J. Dennis Reg. Dir., The Conference Board Southern Europe Lawrence A. Fox Vice Pres., NAM Hon. Bryce N. Harlow V.P., Procter & Gamble Co. Hon. Martin J. Hillenbrand Dir. Gen., Atlantic Inst., Paris Claire Giannini Hoffman Bertrand Hommey Patronat Francois, Paris Shigeo Horie Sr. Advisor, Bank of Tokyo, Ltd. Fisher Howe Dr. Herman Kahn Di r., Hudson Institute Ivan Lansborg Henriquez Pres., SEGUROSCA, Caracas Dr. J. Sterling Livingston Pres., Sterling Institute Carlos Llano Cifuentes IPADE, Mexico City Dr. Rodrigo Llorente Martinez Pres., CICYP, Bogota Mary P. Lord Atlantic Institute Thomas D. Lumpkin Pres., Gulf-Latin America Hon. George C. McGhee Tatsuzo Mizukami Pres., IM4J, Tokyo Dr. Clifford C. Nelson Pres., American Assembly Hon. Frederick E. Nolting, Jr. Hon. Frank Pace, Jr. Pres., I ESC Dr. Aurelio Peccei Chmn., Italconsult Co., Rome John P. Phelps, Jr. Dir., Fund for For. Inv., Caracas Ch. Scrivener Sec'y of St. Consumer Affs., Paris Ralph E. Smiley Chmn., Eooz, Allen & Hamilton Int'l Albert T. Sommers Sr. V.P. & Chief Economist The Conference Board Washington SyCip Manila, Philippines Hon. Alexander B. Trowbridge Vice Chmn., Allied Chemical Corp. Hon. John W. Tuthill Pres., The Salzburg Seminar Dr. Jose J. Urdaneta R. Pres., VECSA, Caracas Harold M. Williams Dean, Grad. Sch. of Mgt,, UCLA Carl-Henrik, Winqwist Sec'y Gen,, Int'l CoC, Paris Dr. Boris Yavitz Dean, Grad. Bus. Sch., Columbia U. Watergate Office Building-Suite 905 ? 2600 Virginia Avenue, NW Washington, D.C. 20037 ? Tel. (202) 337-1022 ? Telex: 1MD1 64469 May 18, 1977 MEMORANDUM FOR IMDI BOARD, COUNCIL, AND FACULTY MEMBERS SUBJECT: 1. Joint Council Quarterly Meetings -- June 6 and September 12; 2. Highlights of discussions during worldwide trip I have just returned to Washington after 35 days of international travel and will be leaving again shortly for Mexico for our inter- view with President Lopez Portillo for the next issue of our Top Management Report. But before departing, I want to write you this memo for two purposes: First, to provide final details on our next Quarterly Meeting -- Monday, June 6, to be convened in the Rayburn House Office Building, (and to give advance notice on our September Quarterly Meeting); and - Second, to describe a few highlights of our eight-nation series of discussions with foreign Chiefs of State and Heads of Govern- ment, NATO and EEC officials, representatives of both American Embassies and American business, chief executives of foreign multinational companies; officials from international organiza- tions (International Chamber, GATT, ILO, UNESCO, OECD) and aca- demia. It was a magnificent experience -- encouraging, enlighten- ing, sobering, even in some areas (such as Eurocommunism) some- what frightening, but in balance, overwhelmingly on the encour- aging side. Let's begin with the June 6 Quarterly Meeting of our Joint Councils: 1) Please find enclosed the final agenda; note we will be meeting in the Rayburn House Office Building, room 2168A, beginning at 3:00 p.m. 2) Wives are cordially invited to join their husbands for the reception and dinner beginning at 6:30 p.m. For the June 6 meeting only, because of commencements and other family events, there will not be a special after- noon program for wives. The Women's Program will begin again in September. A p p ra6~' QxB~ ~2~! ~ ~ be2bp0~ ~F~ i~ ~ $~F@P~ 0'i~I ~~~10~F~ i~ b 6 ~9 S , The George Washington University and the Fund for Multinational Management Education. Approved W Release 2004/03/16: CIA-RDP80M0b*t5A002500040027-5 2- 3) The theme for our discussion will be "Directions of the New Administration and the New Congress." We are following our usual practice of calling upon a special Steering Committee of Corporate Associates to select questions of greatest interest to U.S. business as a basis for the afternoon discussion. In addition, we are asking each Board, Council, and Faculty Member to review the agenda and the speakers, and come prepared with several questions. This will both enliven and sharpen the discussions. We are asking those who have not yet informed us of their plans for parti- cipation on June 6 to please do so via the enclosed form. Concerning the September 12 Joint Council Quarterly Meeting, the theme will be "Roundtable Discussions on Economic Policies"; and speakers/discussion leaders will include Austin Kiplinger as chairman, the Honorable Bert Lance, Director of the Office of Management and Budget, and the Honorable C. Fred Bergsten, Assistant Secretary of the Treasury for International Affairs. As you may recall, Assistant Secretary Bergsten was a member of our Board of Advisors prior to his appointment, and is now a member of our Washington Policy Council. Now, the second point of this memo: trip highlights. This is a difficult job -- especially in just a few pages. We want to arrange an early dialogue with our corporate and government associates so that IMDI impressions and evaluations will be exchanged with your impressions and conclusions. But in the meantime, given the inadequacies of attempting a summary of several hundred in-depth discussions in several pages, here are a few impressions and considerations: 1. Basic mission: The first priority was to interview or make arrange- ments for statements by Heads of Government for our next Top Manage- ment Report. This mission is nearing completion; "guest authors" are firm from seven nations (Japan, Indonesia, Australia, Italy, Belgium, The Netherlands, and Mexico), plus NATO Secretary General Joseph Luns and EEC Commission President Roy Jenkins. They are addressing this question: "What do governments need and want from foreign international companies?" Representing business viewpoints -- what international companies need from foreign governments -- will be Fiat Chairman Giovanni Agnelli, Nestle CEO Arthur Firer, Xerox Chairman C. Peter McColough, Pullman Swindell President Donald E. Stingel, and Newsweek, Inc. President and Publisher Robert D. Campbell. Our Top Management Reportp, co- sponsored by IMDI Corporate Associates and the State Department's Bureau of Educational and Cultural Affairs, are designed to improve the climate in which U.S. foreign policy and corporate policies are conducted. Approved For Release 2004/03/16 : CIA-RDP80M00165A002500040027-5 Approved Release 2004/03/16 CIA-RDP80M0i5A002500040027-5 2. Impressions on the political climate for international business: In one sense, there has been a substantial improvement in the political climate compared to even a few years ago. (Compared with a decade ago, the change has been dramatic. We recall the sharp pronouncements at that time by Jean-Jacques Servan-Schreiber, who warned the world to guard against "The American Challenge" and American "corporate imperialism.") Today, if there is any single theme by foreign governments, it is, perhaps, "Yankee, stay here." Don't dis-invest. Don't fire employees, or "export jobs." The sluggish state of the world economy, coupled with growing uncertainties over the recovery itself, have contributed to the desire by host governments for U.S. investments -- even as U.S. companies grow less enchanted with the idea of increasing their over- seas investments. 3. Need for U.S. leadership: Again and again, around the rim of Asia, through the Middle East and into the heart of industrialized Europe, we heard the same theme: "We need, want, and welcome American leader- ship; for only America has the political power, industrial strength, management, technology and money to get the world economy moving." Our friends cautioned that they do not need or want an arrogant or domineering America; but they truly want our initiatives -- on a self- respecting basis. In balance, our foreign friends like what they see of the new Administra- tion. As one business leader observed, world reactions have gone through three phases: . first, wonderment, "Who is Jimmy Carter?" second, approval -- of the first round of high-level appointees; and - . third, concern mixed with hope as to what policies President Carter will actually adopt that will affect their future. The "hope" seems to outweigh the concerns at this early stage. They want to believe in a fair, free, liberal trade-and-investment world community, spearheaded by the U.S. Government (both Administration and Congress). But one senses that America is under a microscope; and that any major faltering, lack of confidence, or backsliding on our part might well be magnified out of proportion by our foreign friends, with unhappy consequences for all concerned. 4. Nationalism: It is by no means dead. But fortunately, it is alive more on a passive rather than an active basis. It is obvious to other countries that U.S. foreign investments are not surging ahead at the rate our foreign friends might like -- in Indonesia, Australia, Egypt, or anywhere we visited. Americans are exercising caution for a variety of reasons. How can a new investor in Indonesia Approved For Release 2004/03/16 : CIA-RDP80M00165A002500040027-5 Approved FQp-Release 2004/03/16: CIA-RDP80M0&W5A002500040027-5 -4- know that the "oil experience" will not be repeated in other fields? How can an investor in Australia know how successful Prime Minister Fraser will be in winning his battle against soaring wages and inflation? (It is evident that the Prime Minister is fighting valiantly and intends to win.) How can an investor in Egypt work around the many obstacles, including horrendous bottlenecks and political uncertainties? (Yet, one can see clear, early signs of progress. As Allis-Chalmers CEO David C. Scott reported in his capac- ity as chairman of the U.S. Section of the Egypt-U.S. Business Council, "There are many persuasive reasons for U.S. companies to invest in Egypt.") If a single generalization had to be reached, I believe it is this: more and more nations are now recognizing they must do a better job in competing for foreign investments and be prepared for truly competi- tive negotiating. The immediate task, it seems to me, is for America to encourage this trend through fresh initiatives and strong nego- tiating. 5. Labor: IMDI's priority has always been to bring government and business leaders together for the purpose of exchanging views on issues of major common interest, in fulfillment of our own mission, which is "to build closer bonds of unity among men and nations through international cooperation." While we have not excluded labor, neither has it been in the central stream of IMDI's plans and programs. This trip brought home the explosiveness of the labor issue -- espe- cially in the minds of European affiliates of U.S. companies. In The Hague, the issue seemed of overriding importance. Rather than. cite statistics, I shall refer to just one example, the case of the corporate president who felt he had to dismiss a "trouble- maker," but could not because of labor policies and pressures. So the CEO, knowing that a firing was impossible, instructed the man to simply sit at home and receive full pay for doing nothing for the next three years until his retirement. So it happened. But the union said, "Not so. You deprived this man of his right to work. Therefore, in addition, give him a cash settlement" -- which the CEO was compelled to do. On the positive side, we witnessed heartening examples of U.S. companies making outstanding use of "work councils" to build employee understand- ing on corporate goals and the need for being competitive and earning profits. It is a mixed bag, alarming and encouraging -- an issue obvi- ously demanding mounting corporate attention. 6. Corporate credibility: Here in the U.S., corporate top management has been keenly aware that "corporate credibility" is a serious issue. In last year's Conference Board report of critical issues, CEOs rated as their number one concern "growing distrust on the part of the general public." Approved For Release 2004/03/16 : CIA-RDP80M00165A002500040027-5 Approved F .Release 2004/03/165 CIA-RDP80MOOWA002500040027-5 Our sampling of overseas top management concerns was selective, not exhaustive. But again and again, the response was similar; multi- national corporations of all nations (not just the U.S.), are under suspicion, often attack; they are not credited by the public (including government and labor) for their positive contributions to the commu- nities in which they do business. Here are several representative judgments: From a high U.S. Government official in Europe: Demonstrating and documenting "corporate social responsi- bility" should have highest priority, especially in France. Explaining the facts about business is a necessary response to the increasing strength of Eurocommunism, and the damaging publicity currently facing the multinational. There is a definite bias against MNCs. From a Swiss corporate CEO: In response to numerous misconceptions surrounding MNCs, it is important to focus on the positive role of the multinationals, especially in the context of the "North-South Dialogue." From an Italian corporate CEO: We need recognition for companies as corporate citizens. And for our part, within companies, we need acceptance of codes for a "clean MNC." . From a French corporate CEO: Recognition by European managers that business is in jeopardy is a relatively new phenomenon. But CEOs are now alert. They are concerned and want to take constructive action to handle the prob- lem with "understanding." 7. Eurocommunism: The likelihood that the French Communists may, within a year, be "helping" to govern France was viewed with apprehension wherever we went. While we were in Europe, business executives from the Patronat Fran9ais met with the leadership of the Communist Party, a meeting which degenerated into a shouting match as the Communists defined their goals vis-a-vis business once the Communists had won in the elections. What business and government leaders expressed to us were the stakes. At stake, in the long run, is not just profitability. At stake is the private enterprise system -- or, if you will, the "mixed economy" in which private business works in harmony with government in such common objectives as R & D, production, economic growth, job creation, and attainment of national objectives. True or false, there is mounting belief that our present economic system is not meeting the basic needs of middle- and lower-income families whose modest standards of living have been sorely hurt by the ravages of inflation. "Business credibility" plummets as the promises of Eurocommunism grow bolder and more eloquent. Approved For Release 2004/03/16 : CIA-RDP80M00165A002500040027-5 Approved Release 2004/03/12_ CIA-RDP80M09"5A002500040027-5 Therefore, this conclusion: CEOs are in the very forefront of the battle of social systems. And "corporate credibility" -- or the lack of it -- is now or may soon be an unavoidable issue. How to come to grips with these government-business concerns is a subject that IMDI will want to address in its programs and publications. I'm looking forward to our getting together and exchanging views. P.S. We would also like to take this opportunity to welcome the Honorable Harold M. Williams, recently confirmed as Chairman of the Securities and Exchange Commission, as the newest member of our Washington Policy Council. As former Dean of UCLA's Graduate School of Management, Mr. Williams was a member of IMDI's Board of Advisors. Approved For Release 2004/03/16 : CIA-RDP80M00165A002500040027-5 r. _Aporoved.For..Release 2004/03/16 : CIA-RDP8OM00165, 002500040027-5 The Direct Central Intelligence Washington. D. 0.20505 3 JUN 1977 Dear Gene, Sorry to take so long to answer your letter but I've been juggling my long-range schedule to accommodate your request to address the Council. I think I've now succeeded and can give you a firm commitment for the 5th of December. -,.My office will be in touch with your staff to coordinate details. Look forward to chatting with you when next we meet. In the meantime, all the best. Mr. Eugene Bradley President, International-Management and Development Institute Suite 905, 2600 Virginia Avenue, N.W. Washington, D.C. 20037 Approved For ase 2004/03/16 : CIA-RDP80M00165A002500040027-5 Dlrec,' j* International Management and Development Institute Hon. n Rusk - Hq_ ei :4 Chairman a Approved For se 28A4/03/ 16 :CIA-RDP80M00165i` 2500040027-5 - - G:.e- - llay _ Preadent - atergate ce But ing-Suite 905 ? 2600 Virginia r venue, NW Etecwive ilea str., Hon. Theodore Achilles _ 7.~ J Vice Chinn., Atlantic Council ~,,,,,,,(,~t,e,-',,,~V Processor Edward C. Bursk May 6, 197 7 Hon. Editor, Harvard Bus. Review Billy C. Christensen Vice Pres., IBM World Trade EuropefMiddle East/Africa Corp. Gen. Lucius D. Clay, USA (Ret.) Henry R. Geyelin Pres., Council of Americas Walter E. Hoadley Admiral Stansfield Turner, U.S.N. ankofAmerica En Kdillefer efer Tom Director of Central Intelligence Pres., U.S. Trust Co. of New York Dr. Antonie T. Knoppers Washington, D.C. 20505 Former Vice Chmn., Merck & Co. Dr. Alexander Lewis, Jr. Pres., Gulf Oil Foundation Dear Stan: Hon. Paul W. McCracken ' Univ, of Michigan Hon. Lawrence C. McQuade Vice Pres R W Grace & Co . ., . . H. E. Egidio Ort ona I am just back in Washington after 15 days of international travel, Chinn., Honeywell Into. Systems Italia; former Amb. of Italy to U.S. and I shall be leaving again shortly for Mexico City.. The purpose Wylie S. Robson Exec. V.P., Eastman Kodak of this travelling is to either interview or secure statements from. Relnaldo Scarpetta IMDI Director, Latin America Chiefs of State or Heads of Government for our Top Management Report Board of Advisors series and for The Christian Science Monitor., As an aside, Terry Giovanni Agnelli Pi?es., Fiat SPA and I had a most interesting interview with NATO Secretary General Dr. Vernon R. Alden Chmn.,Boston Co. Luns and a fine session (not for publication) with Al Haig. Hon. Willis C. Armstrong U.S. Council, Int'l. CoC yea v~, Robert W. Barnett Dir., Wash. Ctr., Asia Society Before departing the city again, I would like to renew with you a Dr. Daniel Bendahan Pres.,AVE,Caracas Frank Brlceno Fortique conversation you and I had before your confirmation. Pies., Gerencia & Desarrollo, Caracas - Han. W, Randolph Burgess Vice e Chinn., Atlantic Council You may recall that I invited you to be our honored dinner speaker John L. Caldwell Dir., Center for Int'l Bus. for the Joint Council Quarterly Meeting of our corporate, government:, Aa G lotions, an . C Cr eanean Joh and diplomatic associates which will be convened on Capitol Hill this Pros' , Philippe ippe J. Dennis next month. You advised at that time that in principle you would be Sou.Europe ,uConference Board Southern he pleased to be a dinner speaker at one of our Quarterly sessions, beat Lawrence s., Fox Vice Pros., that June was too soon -- you would like a six-month reprieve -- and NAM Hon. Bryce N. Harlow V.P., Procter & Gamble Co. that we should invite you again. Hon. Martin J. Hillenbrand Dir. Gen., Atlantic Inst., Paris Claire Giannini Hoffman We are now making plans for our September and December Quarterly Bertrand Hommey Patronat Hories CelS,PaNa Shigeoeo Horie Meetings and would be honored to have you as our dinner speaker for Sr Advisor, Bank of Tokyo, Ltd. Fisher Howe either of these dinner meetings -- either Monday, September 12, or Dr. Kahn Dir., Hudson Institute December 5. Our preference would be for September 12, if your calen- Ivan Ivan Lansberg Henriquez der is clear. Pres., SEGUROSCA, Caracas Dr..J. Sterling Livingston Pres., Sterling Institute Carlos Llano Cifuentes IPADE, Mexico City The afternoon speakers for September 12 include Austin Kiplinger Dr. Rodrigo oMartinez Pres., l CYP, vP, Bogota (Editor, The Kiplinger Washington Letter) as Chairman, Bert Lance from Mary P. Lord Atlantic Institute 0MB, and Fred Bergsten from Treasury. Thomas D. Lumpkin Pres., Gulf-Latin America Hon. George C. McGhea Tatewzo Mizukami By way of background on our Joint Council Quarterly Meetings, I am Pres., IMAJ, Tokyo Dr. Clifford C. Nelson enclosing:- Pres., American Assembly Hon. Frederick E. Nolting, Jr. Hon. Frank Pace, Jr. Pres.SC 1. The agenda from our most recent Joint Council Quarterly Dr. .Aurelio Peccei Chinn., ltalconsult Co., Rome Meeting -- convened in the U.S. Capitol on March 7 -- Jo Phelps, Jr, For. Inv., Caracas Dir., , Fund for plus the agenda from the June 6 session to be held in Ch. Scrivener Sec'y of St. ConsumerAffs., Paris the Rayburn House Office Building; Ralph E. Smiley Chmn., Boor, Allen & Hamilton Intl Albert T. Sommers Sr. V.P. &Chief Economist 2. The 1976-77 Report-to IMDI Board and Council Members, The Conference Board Washington SyCip which on page 4, lists the corporate, government, and Manila, Philippines Hon. Alexander B. Trowbridge diplomatic associates invited to our Joint Council Vice Chinn., Allied Chemical Corp. Hori.JohnW.Tuthill Quarterly Meetings; and Pres., The Salzburg Seminar Dr. Jose J. Urdaneta R. Pres., VECSA, Caracas Harold M. Williams Dean, Grad. Sch. of Mgt., UCLA Carl-Henrik Sec'y Gen., Intl CoC, Paris Approved For Release 2004/03/16 : CIA-RDP80M00165AO02500040027-5 Dr. Boris Yavitz Dean, Grad. Bus. Sch., Columbia U. Associated with The Johns Hopkins School of Advanced International Studies. Approved For ase 2004/03/16 : CIA-RDP80M0016962500040027-5 3. Our current Top Management Report, co-published with the State - Department, indicating the educational thrust of our Institute. Stan, for our planning, we would be most grateful if you could let us know if you can be with us for either the September or December session. Of course, Pat is most cordially invited. She might be interested to know that wives of all of our Joint Councils are invited to these dinner sessions. As a final note, Terry and I had an absolutely magnificent experience in our series of interviews in 8 countries. One of the very nice advantages in return- ing was seeing the staff and friends and reviewing correspondence, which included the color photos of your swearing-in and luncheon. Thank you very much from both of us. With all best wishes. Cordially, Gene E. Bradley- President P.S. When we next see you, we will brief you on the superb hour we spent with Al Haig, who is now a member of our Board of Advisers -- and one of your greatest admirers and boosters. What a guy! Approved For Release 2004/03/16 : CIA-RDP80M00165A002500040027-5 or Relqp 2004/03/16 : CIA-RDP80M00165A002500040027-5 cd t E) ?1-~ r~ 11; U; :4-a N tnC7A C E C4naMo s , f 1 ea ~ eo~_~O 00 Appro4ccFgr42elease 2004/03/16 : CIA-RDP80MOO165AO02500040027-5 CONFIDENTIAL SECRET TO: ACTION NrU 1 DCI a e -u.A EXECUTIVE SECRETARIAT Routing Slip D/DCI / NI A/DCI /PA Remarks: C T S vac ~~U.`c~ \v, c C9 C.) ~~ `c~?r LAA~ q/c'7 - rr a-e 144"L` Approved For Rele a 2004/03/16: CIA-RDP80M00104%40027-5 t D a a 3637 (5-77) UNCLASSIFIED )NFIDENTIAL SECRET 'App v For a ease 16 : CIA-RDP80M00165AO02500040027-5 AJDCI/PA 4 Approved For Release 2004/03/16: CIA-ROP8$ A002500040027-5 Ap~ Date EXECUTIVE SECRETARIAT Routing Slip Next 2 Page(s) In Document Exempt Approved For Release 2004/03/16 : CIA-RDP80M00165AO02500040027-5 Approved For Release 2004/03/16 : CIA-RDP80M00165AO02500040027-5