National Development Corporations

National Development Corporations

 

specialized institutions in the developing countries established with direct participation or financial support by the state to provide long-term credit and financing to the national economy. These have become widespread with the collapse of the imperialist colonial system and the struggle of the developing countries for economic independence. In the early 1970’s, such credit and investment institutions existed in more than 70 developing countries.

The establishment of national development corporations was made necessary by the conditions in which the transformation and development of the economies of the developing countries have been occurring. The broad dispersal and lack of centralization of national capital make the establishment of modern industrial enterprises difficult. At the same time, many developing countries have credit systems in which modern forms of credit are not adequately developed, private credit institutions possess only limited resources, and foreign banks have restricted themselves primarily to short-term financing of direct transactions without forfeiting their dominance. Under these conditions, the mobilization of necessary monetary resources, including hard currency, and their use for economic reconstruction are only possible on the basis of expanded economic activity on the part of the state.

The creation of national development corporations has become an important factor in the expansion of the state’s role in economic development. Examples of specialized institutions of this type include the Nacional Financiera in Mexico; the National Economic Development Bank in Brazil; and the Industrial Finance Corporation, the Industrial Credit and Investment Corporation, and the Industrial Development Bank of India. National development corporations have also been set up in numerous African countries—in Nigeria, for example, the Nigerian Enterprises Promotion Board and Nigerian Agricultural Bank. In Kenya the Industrial and Commercial Development Corporation and the Development Finance Company have been formed, while Tunisia has the National Investment Corporation.

National development corporations have usually been organized as joint-stock companies. The extent of state participation and supervision differs from country to country. National development corporations may be state owned, privately owned, or of mixed ownership. The resources of the development corporations are derived primarily from government loans, loans from governmental and international financial organizations, and loans from foreign private banks. Therefore these corporations can often extend credit not only in their respective national currencies but also in various foreign currencies. To replenish their own capital from the domestic money market, national development corporations issue bonds and special certificates and also attract capital in the form of time deposits. These corporations help mobilize internal savings and direct them into material production. The functions of national development corporations also go beyond credit and investment: they conduct studies to determine the suitability and yield of potential investments, give technical assistance in the construction, expansion, and modernization of enterprises, and take part in the management of new firms.

In Southeast Asia and certain Latin American countries, national development corporations ordinarily specialize in the financing of industry. In most of the African states, which are taking their first steps toward creation of their own national economies, they also offer credit and financing to such other economic sectors as trade, transportation, and local services.

In sum, the successful establishment of national development corporations constitutes an important element in the restructuring of the credit systems of the developing countries to meet the requirements of independent national development.

REFERENCES

Utkin, E. A. Finansy i kredit stran Azii, Afriki i Latinskoi Ameriki. Moscow, 1965.
Gannage, E. Institutions et développement. Paris, 1966.
Perera, P. Development Finance: Institutions, Problems, and Prospects, 2nd ed. New York, 1969 (Includes bibliography.)

I. I. BOL’SHAKOVA

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