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UN: Business Buys Hardly Help Poor

October 4, 2000

LONDON (AP) _ Cross-border investment surged to $865 billion last year, but most of that money went to mergers and buyouts of existing businesses, and it did little to help the world’s poorest people, the United Nations said Tuesday.

The data, which came from an annual report issued by the U.N. Conference on Trade and Development, said 1999′s total foreign direct investment worldwide was up from $640 billion the year before. Such a boost would appear to be good for developing countries, which need foreign investment in an era when foreign banks have been growing increasingly stingy with overseas loans.

But of the 1999 total, 83 percent went for mergers and acquisitions, the report said, and most of those deals took place among a handful of rich countries. Increasingly, large companies are choosing to invest by buying or merging with foreign companies, rather than by starting a new operation from scratch as developing countries would like, the study said.

Far from helping poorer workers, corporate consolidation often leads to plant closures and layoffs. It can snuff out local competition, particularly in countries that lack a strong government to offset the growing concentration of economic power in private hands, according to the report.

Of the $720 billion that went to cross-border mergers and buyouts last year, the United States and other wealthy nations accounted for an overwhelming $645 billion. Developing countries, meanwhile, were host to deals worth just $63 billion, the report said.

There were some cases when foreign business takeovers helped poor countries. In Latin America, for example, the foreign acquisitions of local telecommunications firms gave countries money they needed to grow, said UNCTAD economist Gabriele Koehler, who helped write the report.

And not all foreign investment flows from rich countries to poor. Earlier this year, for example, India’s Tata Tea Ltd. bought Britain’s Tetley Group.

``It cuts both ways,″ Koehler said.

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