THE ROLE AFFLUENT COUNTRIES PLAY IN THE ECONOMIES AND CAPITAL FARMING OF UNDERDEVELOPED NATIONS Presently, there are over 35,000 multinational corporations (MNC) worldwide, controlling over 15,000 foreign subsidiaries and accounting approximately one-third of the global production. The developing countries that received the most multinational investment are those perceived to have the utmost development growth. They are commonly identified as newly industrialized countries and consist of Asian countries like China, Singapore, Malaysia, Thailand and Latin American countries like Mexico, Brazil and Argentina. The ten largest recipient of foreign direct investment receive nearly 95% of the totality, while the entire African countries set jointly obtain less than 4%. The poorest 50 countries of the world among them obtain less than 2% (Boyzk 2009). At first, the majority of MNC investment in developing countries was in mines and agricultural estates. These days mining accounts for only 6%, with manufacturing and services accounting for more than half and Oil & Gas for about one-third. The cost of the total MNC globally is expected to be over $1.5 trillion of which about one-third is in the developing countries (Schermerhorn 2009). In this twenty-first century, multinational companies have turn into central institutes of developing nations. The government of a country must be concerned about food security, industrial production and other supplies that the country requires for
Globalization over the past twenty has become an issue in many countries. This industrialization of second and third world countries by Western Civilization creates many opportunities for the inhabitants. Not only does it expand trading markets, but also promotes productivity and efficiency; thus improving the country and integrating it into the industrial world. This process not only benefits third world counties, but also industrialized nations by allowing them to export goods to the developing world and increase their profit margin.
MNC’s/TNC’s are companies that locate their factories in various places throughout the world. This gives countries more jobs, access to the global market, cheap manufacturing and large profits.
a. MNEs often get accused for doing outsource in LDC. In less developed country, many workers and natural resources have been exploited to get huge amount of profit. The MNEs do not care about the country and its development, only thinking how to make higher profit. Since they do not care about the less developed country, they will disadvantage the LDC as the host country and make higher profit for themselves. As a result, the LDC country will suffer and lead them to great poverty.
The gap between rich and poor nations is still growing. Although rich nations have provided aid and technical assistance to Third World nations, the developing nations face many obstacles in their drive to modernize. The population explosion, inflation, natural disasters, poor planning, and even government corruption have upset the development plans of many Third World nations. Some progress has been made in increasing food production. Researchers developed new
In addition it is worth considering that emerging economies having been attracting increasingly more Foreign Direct Investment (FDI) having accounted for 52% of global FDI inflows according to recent data. Looking closer at the FDI spread based on regional allocation it is worth noting that Nigeria received the greatest proportion of FDI in Africa, Indonesia in South-Eastern Asia, Mexico in Central America and Turkey in West Asia. This demonstrates the investment potential within the MINT
To be more precise the investments from eh developed countries with their investment in the emerging of developing countries are from the big Trans national corporations that have stronger foothold in world capital markets. Thus any kind of investment either through opening of wholly foreign investment venture or joint ventures with domestic companies of the developing nations help in greater valuation of the companies world stock market increasing overall capitalization.
Since World War II, trade between growing and manufacturing nations has strengthened and borrowing of poor countries from the rich countries has increased. The growing link between these two groups of economies increased eventually in addition to the increase in the rate of dependability amongst them. With the rapid growth in wealth and industrialization of the First World, only a few developing countries managed to have adequate economic growth on the line of the developed countries. Many of the developing countries which were poor at that time still remained to be poor today even today in comparison to the industrialized nations. Dearth of capital and skilled labor produces a low level of per capita income preventing the developing countries to realize their economies of scale through which many of the developed countries benefit from. Several attempts have been made by developed countries to decrease the disparities between rich and the poor economies. To finance their domestic investment, developing countries rely on other governments or international organizations like International Monetary Fund (IMF) and World Bank to procure loans. Besides these loans, foreign investments in these countries are financed by private companies, this from of investment is known as Foreign Direct Investment (FDI). In case of FDIs, the foreign companies, especially Transnational Corporations (TNCs), invest in the growing nations and remain as the solitary owners of these
In the last few decades of the 20th century, the rapid transformation of the industrial world took a new form. The economy is one of the areas experiencing striking changes in these times. What is certain is the emergence of multinational companies, to some extent, open up opportunities for economic globalization. The economic growth in the 19th century in many developed countries are originated from international capital movements that growing rapidly at the time. Mobility of factors of production that occurred between the states reached its breaking point with the presence of multinational companies. Perhaps, the most important developments in international economic relations during the last three decades is the amazing surge of strength and influence of large multinational corporations. They are the main distributor of various factors of production, capital, labor and production technology, all in a massive scale, from one country to another.
Opening up their economies to the global economy has been essential in enabling many developing countries to develop competitive advantages in the manufacture of certain products. In these countries, defined by the World Bank as the "new globalizers," the number of people in absolute poverty declined by over 120 million (14 percent) between 1993 and 1998.1
Developing country MNCs may have more experience as they used to doing so at home where home governments do not supply them goods. Therefore, MNCs may suffer for the ineffectiveness of the government which can lead to unexpected cost and also size of the operations being limited in the country. LDCs have lower government effectiveness which causes the government systems and establishments are slow and politically dependant, thus lead to lack of high quality of public goods.
developing world and they receive more than 90% of the investment flowing from developed to
During the boom of economic and trade liberalization, China has become an important area of international investment. Many multinational corporations (MNCs) are more focused on large domestic market in China for investment. Most of the major MNCs have cultural distance with China. The major concerned factor for those MNCs is the entry modes to China Market. With a population of more than 1.3 billion people and an area larger than the United States, the size and scale in China has various problems from any other market. For the lack of local understanding in China it could be difficulties for the Western multinationals in the China market. Entry modes considering "various dimensions, including cultural background of investors , technological
There are more than 250 multinationals that are invested in India thus far. The reasons for investing are
The rapidity with the MNCs are growing is indicated by the fact that while according to the world investment report 1997 there were about 45,000 MNCs with 2,80,000 overseas affiliates; according to the world investment report 2001, there were over 63,000 of them with about 8,22,000 overseas affiliates. China was host to about 3.64 lakh of the affiliates (i.e., more than
With a GDP growth of almost 7 percent1, India is one of the most promising and fastest-growing economies in the world. But despite the huge potential of the country, the performance of Multinational Corporations (MNCs) in India has been decidedly mixed. Many MNCs which have succeeded remarkably elsewhere in the world have yet to make a significant impact in India. The market entry and penetration strategies that have worked so well for these companies in other countries have been for less successful in India. Many MNCs have struggled to understand Indian customers and come up with suitable products and services. At the same time, some MNCs have done pretty well for themselves. Why have