Mul­ti­na­tio­nal com­pa­nies

Mul­ti­na­tio­nal com­pa­nies (MNCs)
= firms that own, con­trol, or ma­na­ge pro­duc­tion or dis­tri­bu­ti­on fa­ci­li­ties in se­veral coun­tries

⇒ 25% of world out­put

Pro­blems crea­ted by MNCs in the home coun­try

(-) loss of un­skil­led and se­mis­kil­led jobs	(+) crea­ti­on of some hig­her qua­li­fied jobs at home, i.e. cle­ri­cal, ma­na­ge­ri­al, tech­ni­cal
	(+) se­cu­ring of jobs at home through im­pro­ved com­pe­ti­tiven­ess
(-) ex­port of ad­van­ced tech­no­lo­gy	(+) ten­den­cy of MNCs to con­cen­tra­te R+D in the home na­ti­on
(-) loss of taxes

Pro­blems crea­ted by MNCs in the host coun­try

(-) do­mi­na­ti­on of host coun­tries' eco­no­mies
→ for­eign af­fi­lia­te acts ac­cor­ding to MNC's and home coun­try's po­li­cies

• e.g. no ex­ports to Iran

→ Ef­fect on na­tio­nal tas­tes

• e.g. Coca-Cola, Mc­Do­nald's

(-) in­flow and out­flow of ca­pi­tal not con­trollable

(-) brain-drain to home na­ti­on
be­cau­se of con­cen­tra­ti­on of R+D there
⇒ keeps host coun­try tech­no­lo­gi­cal­ly de­pen­dent

(-) crow­ding-out (buy­ing-up) of do­mestic in­dus­tries
→ Very bad for emer­ging in­dus­tries in de­ve­lo­ping coun­tries
⇒ Trend mo­no­po­lies /oli­go­po­lies

 

Spe­cial pro­blems for de­ve­lo­ping coun­tries

(-) over­ex­ploi­ta­ti­on of na­tu­ral re­sour­ces

(-) use of ca­pi­tal-in­ten­si­ve pro­duc­tion
(ins­tead of em­ploy­ing host coun­tries' workers)

(-) lack of trai­ning of local la­bour

(-) Ex­ploi­ta­ti­on of poor stan­dards for working con­di­ti­ons
→low wages, long working-hours, poor safe­ty stan­dards etc.

(-) crea­ti­on of "en­cla­ve" eco­no­mies
→ for­eign in­ves­tors just ex­ploit the na­tu­ral re­sour­ces, but don't em­ploy many local workers, pro­fits are re­pa­tria­ted

Coun­ter-mea­su­res by host coun­tries

Ca­na­da: hig­her taxes on for­eign af­fi­lia­tes with less than 25% Ca­na­di­an in­te­rest

India: spe­ci­fi­ca­ti­on of sec­tors where di­rect FI is al­lo­wed + rules for ope­ra­ti­on

Some de­ve­lo­ping/ emer­ging coun­tries:

• only joint-ven­tures al­lo­wed, i.e. with local equi­ty par­ti­ci­pa­ti­on, e.g. China
• rules for:
  • trans­fer of tech­no­lo­gy
  • trai­ning of do­mestic la­bour
  • li­mits on the use of im­por­ted goods
  • re­mis­si­on of pro­fits
  • en­vi­ron­men­tal stan­dards

Se­ve­re step : Na­tio­na­liza­t­i­on of for­eign pro­duc­tion fa­ci­li­ties
→ di­sad­van­ta­ge : bad in­flu­ence on the fu­ture flow of di­rect FI

Ef­forts : In­ter­na­tio­nal code of con­duct for MNCs

Do­ku­ment her­un­ter­la­den [.ppt][37 KB]