LETTER TO ADMIRAL STANSFIELD TURNER FROM GENE E. BRADLEY

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP80M00165A002500040027-5
• Release Decision: RIPPUB
• Original Classification: K
• Document Page Count: 69
• Document Creation Date: December 15, 2016
• Document Release Date: March 1, 2004
• Sequence Number: 27
• Publication Date: September 19, 1977
• Content Type: LETTER

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
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..
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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
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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: [phone]. Telex: IMDI 248698
DI
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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-
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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
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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
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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
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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
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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_
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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"
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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-
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 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
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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. ^
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 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
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 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.
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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
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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."
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 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
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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
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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
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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.
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 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
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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-
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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.
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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.
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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-
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 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.
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 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.
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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-
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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."
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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
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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. "
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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
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 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
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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?
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 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.. . .'"
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 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
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 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.
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 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
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 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
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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
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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
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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:
[phone]. 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 [phone]
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. [phone] ? 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. [phone] ? 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.
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 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
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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."
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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.
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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.
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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
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 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!
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