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Multinational Corporations - Essay Example

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MULTINATIONAL CORPORATIONS Author: Class Name: Name of the School: City: Date: Introduction Multinational corporations are large firms operating in more than one country. They usually have their headquarters in one country mostly the mother country…
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Multinational Corporations

Download file to see previous pages... Globalization-brought about by advancement in technology, transport, and communication- has made it possible for multinational corporations to spread very fast. MNC have both negative and positive impacts on developing countries. Below I have discussed the impacts starting with positive impacts and lastly negative impacts. Employment It is a common thing in developing countries for the governments to actively seek for foreign investors. Multinational corporations provide both direct and indirect employments to developing countries which is a major challenge in these countries. Banking and telecommunication companies are some of the most common companies which have developed over large regions. Due to the size of these companies they create more job opportunities. Creating these job opportunities also account for increased domestic expenditure and income. These companies introduce new technologies to the employees and sometimes even provide training to their employees. This reduces the cost of the government in training its citizens. Taxation revenues One of the major challenges facing developing countries is provision of social amenities to their citizens. This is due to poverty and lack of enough revenues for the government to provide such amenities as education and health services. Lack of basic education for these countries is one major cause of why they lag behind in terms of development. Poor health services contribute to high mortality rates especially to children under the age of five years. Foreign companies seeking to invest in these developing countries have always been welcomed so that they can help these countries add on to their revenues. Taxation adds to the domestic economy of the country where MNCs have invested. Due to this investment there is a direct flow of capital in the host country. Where these corporations are producing companies, they may save the host country’s revenue in terms of import. The companies may produce products that were previously imported to an extent of transforming them into exports. This will in turn earn the host country more revenue. Another source of revenue for the host country’s government is the money taxed directly from the salaries of workers. Previously we saw that multinational corporations provide employment to citizens of the host nations. The government earns revenue from salaries of all its workers in the country. From this discussion it is clear that presence of multinational corporations in a country has a significant impact on the host nation. Growth and efficiency Capital is a basic need of production; however, this is a rare commodity in underdeveloped and developing countries. MNCs offer foreign direct investment (FDI) to these countries. Developing countries may have enough natural resources available in their countries but lack resources in terms of capital and equipment. In mining, for example, most developing countries cannot afford the machinery required leave alone the capital. This is the opportunity for large MNCs specialized in the field to chip in. The host nations in this case have got no choice but to enter into partnership with the company. Another long term advantage to the host nation is improvement in technology. Most developing countries lack the technology needed in many industries. Introduction of foreign technology into these countries is always an advantage. The machinery and structures built, in the long run, will belong to the host nation. Sometimes the new technology is transferred the ...Download file to see next pagesRead More
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