The world has seen a tremendous increase in the global transactions and foreign trade in recent years. The main reason behind this is that now more and more countries are getting engaged in trading with each other in order to increase their profit or sales or protecting them from being eroded by competition. The main objectives which are influencing the companies to engage in international business are expansion of sales,acquiring resources, minimizing competitive risk and diversification of sources of sales and supplies. Besides these there are other few factors like economic factors, cultural factors, technological factors, and social factors which have influence to a greater extent.
Multinational Corporation (MNC) is a corporation or an enterprise that manages production or delivers services in more than one country. It can also be referred to as an international corporation. The International Labour Organization (ILO) has defined an MNC as a corporation that has its management headquarters in one country, known as the home country, and operates in several other countries, known as host countries. The Dutch East India Company was the first multinational corporation in the world and the first company to issue stock. It was also arguably the world's first mega corporation, possessing quasi-governmental powers, including the ability to wage war, negotiate treaties, coin money, and establish colonies.
The first modern multinational corporation is generally thought to be the East India Company. Many corporations have offices, branches or manufacturing plants in different countries from where their original and main headquarters is located. Some multinational corporations are very big, with budgets that exceed some nations' GDPs. Multinational corporations can have a powerful influence in local economies, and even the world economy, and play an important role in international relations and globalization. http://en.wikipedia.org/wiki/Multinational_corporation They have the capacity to shape global trade, production, and financial transactions. Multinational corporations are viewed by many as favoring their home operations when making difficult economic decisions, but this tendency is declining as companies are forced to respond to increasing global competition. Multinational corporations are sometimes perceived as large, utilitarian enterprises with little or no regard for the social and economic well being of the countries in which they operate, but the reality of their situation is more complicated.
The w ay is long, the path is full of thorns, P eo p l e m ay cr it iciz e, But, I have to fly« from one region to another, from the Earth to the sky, to utilize my potential, to bring prosperity to everyone, I have to fly««« Don·t obstruct me, d o n ·t cr it i c iz e .
Channelise me I n right direction, And you w ill find that I can take you, through a prosperous ride. I b eli e ve , I c an f ly« ..
In the poem ¶I· stands for Multinational Companies Ashish kumar,,,Role of mnc in international affairs2005
In more recent times, multinational corporations have grown in power and visibility, but have come to be viewed more ambivalently by both governments and consumers worldwide. Indeed, multinationals today are viewed with increased suspicion given their perceived lack of concern for the economic well-being of particular geographic regions and the public impression that multinationals are gaining power in relation to national government agencies, international trade federations and organizations, and local, national, and international labor organizations. Despite such concerns, multinational corporations appear poised to expand their power and influence as barriers to international trade continue to be removed. Significance of MNCs in world Affairs Influence in Nations' Political Affairs MNCs' influence over countries, particularly those in the less-industrialized world, has not been manifest solely in sheer economic power or manipulative price transfers. Such influence has also been reflected in corporations' willingness and ability to exert leverage directly by employing government officials, participating on important national economic policy making committees, making financial contributions to political parties, and bribery. Furthermore, MNCs actively enlist the help of Northern
governments to further or protect their interests in less-industrialised nations; assistance that has sometimes has involved military force. In 1954, for instance, the US launched an invasion of Guatemala to prevent the Guatemalan government from taking (with compensation plus interest) unused land of United Fruit Company for redistribution to peasants. MNCs and International Politics Especially since the 1980s, MNCs' involvement at international political negotiations and fora has accompanied and encouraged the rise of global corporate economic power. In an effort to reduce barriers to trade and investment capital flows in the last decade, MNCs have lobbied vigorously to shape to their liking Europe's Single Market agreement, the North American Free Trade Agreement (NAFTA), and the World Trade Organisation ( WTO). For MNCs, so-called free trade lessens governmental restrictions on their movement and ability to maximise returns. "The deregulation of trade aims to erase national boundaries insofar as these affect economic life," economists Herman Daly and Robert Goodland have noted. "The policy-making strength of the nation is thereby weakened, and the relative power of MNCs is increased." For example, rules established in the World Trade Organisation( WTO) regarding trade-related intellectual property rights (TRIPs) and trade-related investment measures (TRIMs) will be of particular benefit to MNCs. The first gives corporations greater capacity to privatise and patent life forms, including plant and other genetic resources of less-industrialised nations and peoples.
MNCS IN PAKISTAN Pakistan provides an ideal environment for investment by multinationals and other foreign companies and organizations because of its important geo stratigical importance. With expanding business relations with the countries of the Economic Co-operation Organization. There are no restrictions on remitting back the profits. Facilities for maintaining foreign currency accounts concessions have also been allowed to foreign firms in respect of borrowing rules, etc. A large number of multinationals have been maintaining industries and doing business in the country for a long time. A brief review of those, would make the picture more clear.
The multinationals have invested Rs. 60 million in Pakistan. Initially, the British and European trading and business houses had taken the lead as they had been present in this area for a long time. However, today USA leads with 25% investment, followed by UK (13%), International lending institutions (11%), Germany (6%), Japan (3.25%). Recently, Japan's investment in the automobile industry has increased substantially, thereby increasing its share. Siemens of Germany is perhaps the oldest in the industrial field in Pakistan, having established its industry in 1932, while ICI is the second, having set up the soda ash factory in 1942. These have since expanded their activities in a number of other fields. Unilever, Imperial Tobacco, Shell, Burma Oil also came soon after Independence in 1947. Their consumer products are household names here. The US, German, British and other pharmaceuticals came in the second wave. Many European, Korean and Middle-East companies are active in construction, communications and other fields. Japanese are mainly in the automotive industry, like Toyota, Suzuki, Nissan, Honda. Ansarul Haque Economic Review, Nov, 1993 Role of multinational companies in Pakistan economy List of multinational corporations working in Pakistan
SECTOR WISE BREAKUP
Royal Bank Of Scotland
Standard Charter Bank
Pak al Saudi Bank
Crescent Commercial Bank
Dubai Islamic Bank
Telecommunication and IT
Mobilink Warid Telecom Telenor Wateen Telecom China Mobile
Food and personal care products
Murree Brewery Procter & Gamble Unilever Pakistan McDonald Pizza Hut KFC Pepsi Coca-Cola Nestle Pakistan
Siemens Novartis Aventis
THE COST AND BENEFITS OF MNCS
THE BENEFITS OF MULTINATIONALS
Availability of quality goods and services in the host country:
In some cases, production in a host country may be primarily aimed at the export market. However, in other cases, the inward investment might have been made to gain access to the host country market to circumvent trade barriers. In the case of many Japanese car manufacturers the investment made into UK production has enabled them to get a foothold in the EU and to avoid tariff barriers.
Skills, production techniques and improvements in the quality of human capital: It can be argued that MNCs bring with them new ideas and new techniques that can help to improve the quality of production and help boost the quality of human capital in the host country. Many will not only look to employ local labor but also provide them with training and new skills to help them improve productivity and efficiency.
For the host country, there is a likelihood that the MNC will have to be subject to the tax regime in that country. As a result, many MNCs pay large sums in taxes to the host government. In less developed countries the problem might be that there is a large amount of corruption and bad governance and as a result MNCs might not contribute the tax revenue they could and even if they do it might not find its way through to the government itself.
Improvements in Infrastructure:
In addition to the investment in a country in production or distribution facilities, a company might also invest in additional infrastructure facilities like road, rail, port and communications facilities. This can provide benefits for the whole country.
Another beneficial effect of the MNCS is that they bring employment opportunities to the host country that would otherwise not be created. Direct effect arise when a foreign MNC employs a number of host country citizens
Balance of Payment:
A country¶s balance of payment keeps the track of both its payments and receipts from the other countries. The balance of payment effect is an important consideration for the host country. When a MNC establish a foreign subsidiary the capital account of the host country benefits from the initial capital flow
Competition and economic growth:
Efficient functioning of markets depends on adequate level of competition between the producers. When a new enterprise is established, the number of players in the market and consumer·s choice increases. In turn this can increase the level of competition in a national market, thereby driving down the market prices and increasing the
economic growth. Increased competition tends to stimulate capital investments by firms in plant and equipment, research and development as the struggle to gain a competitive edge over the rivals.
Learning of skills:
Benefits arise when a local enterprise learns valuable skills from the MNCS by its exposure in the market. A firm can learn about specific superior management techniques, superior products and process techniques
The establishment of MNCs helps in creating the relationship with different countries in the world. Thus helps in enhancing the foreign relations
The Costs of Multinationals
The costs can be summarized in the points below - for the most part, the costs are closely linked to the benefits but it will depend on the extent of the benefits that might arise as a result of the activity of the MNC.
Some companies might be producing goods that are not beneficial. Examples might include tobacco products and baby milk - mentioned earlier.
Repatriation of profits:
Profits might go back to the headquarters of the MNC rather than staying in the host country - the benefits, therefore, might not be as great.
The host governments worry that the establishments of MNCS is accompanied by some loss of economic independence. The concern is that the key decisions that can effect the country·s economy are made by the foreign parent that has no real commitment to the host country and over which the host country has no real control
The source of domination:
The MNCS enjoys the benefit of domination. They politically control the economy of the host country
The newly established suffers a lot due the arrival of the multinational companies. The don·t get the enough time to developed and fully establish. Before the flourish the conditions becomes so worst due to MNCs that they wiped out.
Knowledge and Skills Transfer:
The multinational companies usually hire the skilled, trained and professional employees already working in the domestic companies. So the knowledge and skills transfers from these domestic companies to the multinational companies subsidiaries.
Sometimes the multinational companies effect the values, norms and traditions of the host country very badly as they bring with them their own culture and try that the host country·s national adopt these values. Through different marketing strategies they try to sell luxurious products to the people. Some people who don·t have enough money to fulfill their basic needs as a result they adopt different illegal ways for acquiring these products which is very bad for the society. Pakistan these days is facing an immense crisis in political, social and economic drawback, recently Pakistan is passing through a series of chronic and painful problems include political, socioeconomic, energy crises, security, uncertainty in Balochistan, day to day suicide bombing, foreign Drones attacks and worst situation of law and order in FATA and NWFP. These all are brain blasting and heart pinching for all true Pakistanis.
Pakistan has been facing many crisis and problems since the time of its independence, but today the number of problems has multiplied to an extreme. From the basic necessities like food, clothes and shelter to the security of lives.
1. New and sunk companies of Pakistan facing problems due to MNCs. As new companies are struggling for growth and development. While sunken companies are in danger, it is difficult for them to survive. In these conditions if MNCs come in these industries then domestic countries will finished. 2. Due to MNCs society face environmental problems. As they pollute our environment. For example different factories of Multan, Lahore, and Karachi pollute water and air. Telecommunication companies have adjusted their tower in urban areas. Their ultra void is harmful for human health. These things are very harmful for our society.
3. Unethical issues:MNCs are involved in many unethical issues like follows i. Illegal products:Some products are not good for our society like wine, ham burger and pizza, low quality products. It is unethical to sell these products in Pakistan. ii. Cultural Differences: Pakistan is Muslim country and Islam has specific values, traditions. these companies are effecting these values with the help of their products and marketing. They are forcing our youngsters to go against our own traditions. iii. Child Labors: MNCs are hiring Childs labors. As they are cheaply available in Pakistan which is unethical. They are playing with their lives. 4. MNCs are developed organizations in their fields. Domestic industries are facing problems due to MNCs. Domestic industries are producing their product in higher cost so they have to charge high price but due to high competition with they are unable to charge high price and they go to end 5. No doubt consumers are taking benefit from MNCs as they get at low cost. Quality New Technology Variety
6. MNCs are very important source of getting foreign exchange which is useful for Pakistan. 7. MNCs are improving our relations with other countries with which they belong. People and Government of other countries are coming closer to Pakistan due to MNCs. 8. MNCs have created lot of jobs in Pakistan. Which very good for our country as due to it poverty decrease and people become prosper. 9. One bad practice of MNCs is repatriation of profit. According to it they sent their profit to their home country while they are using resources if home country which bad practice.