What are the arguments for FDI/MNCs? Be specific
FDI/MNCs promote benefits relating to the growth and development of capital, technological transfer and integration, and the development of international trade agreements. MNCs, help to create a competitive business environment by initiating economic activities and financing projects that foster capital growth in various sectors of a country’s economy. In addition, MNCs engage in joint ventures and collaborations that ensure the host country meets various capital requirements.
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The nature of the operation of MNCs requires that they import capital to fill the gap associated with new investments. As a result, they contribute to the improvement of the standards of living in the host country. MNCs create platforms that expand the spectrum of opportunities relating to trade. In this regard, the host and home country enjoy benefits relating to exports and imports. MNCs foster socioeconomic growth by increasing opportunities for skill improvement and employment through the expansion of industrial units in various sectors.
MNCs largely depend on outsourced knowledge and thus facilitate the transfer and integration of technology in the country of operation, which ensures the alignment to standards of managerial and technical expertise. In this regard, technological advancement occurs through a pragmatic approach that promotes various production strategies, which necessitate the acquisition of a variety of technical equipment and technologies.
What are the arguments against FDI/MNCs? Be specific
The negative impacts of FDI/MNCs relate to pricing transfers, imperfect competition, and inappropriate distribution of income. MNCs determine the prices of goods and services using systems and procedures that disregard the local market structure. Multinational corporations use sale systems that allow them to manipulate market prices to favor international business operations at the expense of the local market.
Through the adjustment of income taxes and tariff, MNCs expose host countries to price-transfer risks, which increase poverty. MNCs promote imperfect competition by modeling their strategic goals and objectives to exploit the economic advantages in the host country. In this regard, MNCs create market structures and systems that solely favor the advancement of their goals because they have immense financial capabilities in comparison to local business enterprises. MNCs promote firm-specific advantages by creating products and technologies that lead to the attainment of various marketing objectives but encourage the inappropriate distribution of income by concerting economic advantages to a few entities.
Host countries face numerous difficulties in controlling the income of MNCs to favor local social and economic needs. MNCs enjoy the moderate impacts of laws aimed at ensuring that business entities channel a portion of their gross income to local communities because of their influence. Furthermore, the main objective of MNCs is the realization of strategic goals in the international scope, which causes them to overlook aspects of economic distribution in the host country.
Are you in favor of or against the expansion of FDI/MNCs? Explain Why
The role of MNCs in promoting social, economic, and political stability is crucial to the host country and internationally. The drawbacks associated with FDI/MNCs are mainly due to the lack of stringent measures that ensure multinational corporations promote the standards of living in the host country. The proper enforcement of laws to regulate various activities of MNCs would address issues relating to price transfers, imperfect competition, and poor distribution of income.
MNCs create opportunities for countries with inadequate resources and technology thus allowing them to develop capital and human resources, which are crucial elements in the realizations of economic independence. The expansion of MNCs within a scope defined by the host country would generate numerous social and economic benefits.