A viewer asked this question on 8/23/2000:
what is the impact (good and bad) that a multinational corporation can have on a less-developed country?
the pro's and cons for both ,and the impact it have on the country, an example of it, and where can I find more info on it
thanks
stevehaddock gave this response on 8/24/2000:
Less developed countries (LDCs) need money, and multinationals have plenty of it that they are willing to invest. However, having a multinational in your backyard can be a mixed blessing.
While many companies do ethical business in LDCs, there are several unethical business practices that have meant the multinational is causing more problems than they are worth in new jobs and capital.
- Many multinationals do business in LDCs to get around strict environmental or labour laws in their own country. As such, the multinational replaces low paying jobs in a traditional economy with low paying jobs in a modern economy. This causes a lot of displacement as people flock away from the rural areas to the new industrial areas. However, sufficient housing and hygienic facilities (water & sewage) often aren't in place. Moreover, when the multinational moves out, the people who used to work at the factory are often made homeless.
- While multinationals bring lots of money in, historically they send lots of money out - much of it goes out "the back door" when it may have been required to re-invested in the same country. The United States would not need a foreign aid program if it would merely insist that multinationals follow foreign capital movement rules.
- Multinationals often dominate the economy of an LDC and prevent money from being invested in other sectors. For example, in Venezuela, so much of the economy is dependent on oil exports that little money is invested in other industries. When the world price of oil drops, ordinary Venezuelans suffer.
JesseGordon responded:
... [pluses & minuses of FDI]