What are the reasons by which MNCs are set up in developing countries?

As we know MNCs ( Multi National Companies) have latest & advance technology. They are already doing good business in some developed countries. In most of developing countries latest & advance technology is not available. MNCs can provide services using these technology and earn profit. For example Honda Motors & Suzuki Motors have set up Automobile business in India. Vodaphone Mobile has setup Telecom business in India. read less

1. The main reason is affordable labor. 2. Further more developing countries have policies which attracts such MNC's. 3. China is world factory reason being affordable labor and export imports costs less. 4. Overall cost on production and maintaining the office and factories is comparatively less. 5. Under Make In India campaign the main attraction is ease of doing business for eg - The company incorporated in India is required to pay 30% tax+surcharge+education cess on net income earned. It is also required to deduct tax on profits distributed @15.5%+surcharge+education cess. I hope that answers the ques. read less

Examine the Impact of Multinational Corporations Setting up in Developing Countries Essay There has been a very controversial debate over years now about the impact of multinational corporations setting up in developing countries, which have many supporters as well as opponents. Surely there is not only one way to look at this more and more common phenomenon that affects the host countries in many both positive and negative ways that are discussed in this paper. The term multinational corporations (MNCs) is used “to identify firms that have extensive involvement in international business and engage in foreign direct investment (FDI). MNCs own and control value-adding activities in more than one country that are IMPROVE YOUR ACADEMIC RESULTS! We will write a custom essay sample on Examine the Impact of Multinational Corporations Setting up in Developing Countries or any similar topic specifically for you for only $12.90/page! YOUR E-MAIL ORDER NOW usually coordinated from central headquarters” (Griffin and Pustay, 2005). The investment of MNCs in the developing countries has greatly increased since the mid-1980s, because of globalization as they looked for new resources and larger markets (Greer and Singh, 2000). Presently, there are over 35,000 multinational corporations with more than 15,000 foreign subsidiaries, which is around one-third of the whole world production. Their value is estimated to be more than $1.5 trillion, one-third of which in the developing countries (GhanaWeb, 2012). The developing countries with most multinational investment are those with highest growth potential like Asian countries: China, Malaysia, Thailand, Singapore, and Latin American ones: Mexico, Argentina and Brazil. The African countries get less than 4% while the poorest 50 countries worldwide receive less than 2%. Over a half of business activities of MNCs deal with manufacturing and services and one-third with oil and gas (GhanaWeb, 2012). According to the report by the Institute for Policy Studies out of 100 largest world economies, based on corporate sales and country GDPs, 49 of those economies are countries while the other 51 are multinational corporations. Also, it is stated that the sales of the Top 200 corporations are equal to the 27.5 percent of world economic activity (Institute for Policy Studies, 2012). These numbers show how powerful MNCs are and how important they are to the world economy, but what is their impact on the developing countries? On the one hand, multinational corporations setting up in developing countries have a very positive effect on their host countries. First of all they provide direct employment to local people and transfer of skills through education and experience. They also affect the indirect employment through paying rent for land or buildings and cooperating with local suppliers, who now have more demand and must deliver higher quality products. As residents have more chances for income they can purchase more and improve their standards of living, while there is generally greater selection and availability of goods and services. The standard of living of local people in some developing countries like Bermuda, the Bahamas, South Korea, Singapore, Hong Kong, and Taiwan has improved largely after the investment of multinational corporations there (Action Institute, 2012). In addition, attracting foreign investment in the developing countries results in economic growth and higher national income. Such countries are usually better off with higher development rates, higher exports, lower imports and additional tax revenues coming from the multinational corporations. read less

Abstract- Multinational corporations do not come into being from thin air; there must be a form, an organization, and a goal for them to be brought into existence. Many studies that have been carried out in Europe and the rest of developing nations have concentrated on the benefits of Multinational corporations but literature still remains very little when Africa and the rest of the developing nations are touched. This study sought to bridge the gap of MNC by adding more literature on factual findings from a developing country context such as Kenya. It was centered on principles of employment creation, poverty and dependency reduction and foreign direct investment. The study was geared towards the historical background of global investments while tracing their evolution from small businesses to their giant investments that today their massive capital is a real threat to the nation when issues of capital flight fall due. The study is important to policy makers in deciding whether to continue depending upon multinational corporations which result in eventual capital flight or to nurture the local companies for sustainable development. The research adopted descriptive research design. On the basis of facts presented in this study, the MNC has outlived the usefulness as a development agent. The role of MNCs should be redefined in the context of the LDCs in which they operate finally; LDCs should ensure stable political systems to ensure sound economic policies. The study also concludes that the government should take a prerogative role in supporting the operations of the MNCs since they have boosted the economic development of the developing countries with a drive towards full employment. However, the over-dependence on these MNCs should be avoided at all costs. Index Terms- Multinational Corporations, Transfer Pricing, Poverty and dependency, Less Developed Countries I. INTRODUCTION ultinational corporations as we know do not come into being from thin air. There has to be some substance, some meaning and some objective for them to come into being. Historically, the evolution of multinational corporations date back to the 15th century. At that time, the organization of the production unit was wholly private ownership of the means of production. Using technology and simple division of labour, merchants could manufacture basic commodities, “In situ- without need to travel,” (Louis, 1994). Abdullah (1998) early multinational corporations took the form of alliances with the parent country’s military or political powers in extending their activities to foreign areas. Contrary to the simplicity of production of the 15th century, modern complex structure of the world economy is the result of centuries of technological evolution and advancement. According to Clicker (1990) the dominant player in the modern world investment set up is the multinational corporations. According to Root (1994), an MNC is a parent company that engages in foreign production through its affiliates located in several countries, exercises direct control over the policies of its affiliates, and implements business strategies in production, marketing, finance and staffing that transcend national boundaries. These are giant businesses which have expanded and crossed national frontiers, operate globally and whose organizational framework is complex. Robbok and Simmonds (1989) asserted that, the rise of the multinational corporations has confronted the nation state with challenges of the operations of the local jurisdiction. The nation state has had to grapple with national interests and how to protect them from being compromised by the multinational corporations whose focus is control and transfer of goods and money as they cross national borders. Robbok and Simmonds (1989) as well trace the early investment. In 1851 an American (singer) invented the modern sewing machine. This gave way to a number of subsidiaries in different continents in two decades. After this pioneering invention, others followed and wanted to divorce themselves from the control of the parent country. Such group was the Otis brothers (also Americans) who invented the modern lift in 1859. In 1890 Alfred Nobel of Sweden invented dynamite and set up various subsidiaries in Germany and other European countries so as to transfer technology as crucial as handling explosives. In the developing countries, the MNCs are no longer viewed with colonialism or protection from their countries. A new breed of dynamite and aggressive MNCs has emerged over the last three decades. They have cast the stigma of the past which long characterized their predecessors and have thrived on the ability to make more profits and contribute to economic development on their host countries. Nyong’o (1991) strongly contends that, nation-state building requires politically strong nationalistic local entrepreneurs. The study took scope of the General motors’ corporation company which is an American multinational automaker based in Detroit, Michigan and the world’s second largest automaker with its global headquarters in Detroit; GM employs 209,000 people in every major region of the world and does business in some 157 countries. General motors’ produce cars and trucks in 31 countries and sells and services these vehicles through the following divisions: Buick, Cadillac, Chevrolet, GMC, Opel, Vauxhall, and Holden. GM’s oyster subsidiary provides vehicle safety, security and informational services. Unfortunately, for example in Kenya, the manufacturers are the MNC subsidiaries with global interests that often conflict with the national desire to M read less