Multinational corporations are large companies which operate in more than one country. Developing countries are the host countries and have become the object of study as there are many questions regarding the benefits of hosting a MNC. Are MNCs contributing to the sustainable development of a developing country? Or, do they simply exploit developing countries creating a country dependent on that MNC for their own economic, social and ecological growth? Apparently they are transferring new technologies to a developing country, the introduction of sophisticated managing techniques, and foreign direct investments. Depending on this point of view, either the MNC brings valuable tools to a developing country which in turn infuses their economy with new jobs and raises the skills of the workers or the MNC fully exploits the developing country exporting the technology, capital and resources back to the parent country or other developed countries for profit.
Present a set of logic in favor of the existence of MNCs in developing country
DIRECT FOREIGN INVESTMENT (DFI):
MNCs help increase the investment level and thereby the income and employment in the host country. MNCs build up factories, office buildings, warehouses, etc. in the developing countries as a form of subsidiary investment. This results in a large scale flow of funds into the developing country, which is good for the developing nation as it is bringing in a gross amount of foreign currency into the country. We know that DFI is a component of Capital Account. At macroeconomic level, FDI may significantly contribute to finance current account deficits in the balance of payments of host countries. Though the improvement of balance of trade is an argued topic but apparently it is good for the economic growth of a country.
From the perspective of a developing country, establishing a MNC is beneficial in the sense that it creates a huge chance of employment for the labor force of the nation. It increases the employment rate as more people get employed in the newly setup company. As a result, the unemployment rate of the country is also reduced as an after-effect of the increased employment. Hence, MNC provides employment. MNCs can raise employment standards: they can pay better wages than local firms and their environmental and health and safety protocols can set the standard for local practices. MNCs can boost economic development by transferring technology and knowledge to local economies.
The large MNCs that crop up in the developing country is all together a benefit for the country. The provision of employment created due to MNCs reduces the unemployment rate. The tax earned by the government from these MNCs produce a large sum of money that can be invested by the government in the economic development of the country. Moreover, the direct flow of foreign currency into the country creates opportunities for massive subsidiary investment in the developing country.
Consumer Buying Power is getting high:
The established MNCs provide high salary to their employee, which in turn raises the capacity of the consumers to buy more. Thus the buying power of
the consumers in the developing nation increases along with the economy. MNCs can bring benefits to consumers in developing countries, enabling them to buy better quality and better-value products such as mobile phones.
Increase in BOT(Balance of trade)
Balance of trade is the trade difference between a country and the rest of the world. Which means it says that balance of trade is equal to the export of a country minus the imports of that country. MNCs can also contribute to improve the BOT of a country. It also helps increase export and decrease import. A good example can be the case of UniLever. The company can make a contract with the subsidiary in India called Hindustan Lever that they are going to import certain...
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