Conclusion: We have seen above foreign investment by multinational companies have both advantages and disadvantages. In this case a multinational firm has complete control over its business operations ranging from the production of its product or service to its sale to the ultimate use or consumers. Improvements in information technology have reduced the impediments to exerting corporation control across boarders. But in many developing countries, the quantity and quality of public services are low. This tends to raise the propensity to consume and adversely affects the increase in savings of the country. They transact business in a large number of countries and often operate in diversified business activities. This will lead to reduction in employment opportunities in the country.
This capital investment helps the economy develop and increase its productive capacity. School enrollment rates for ages six to twenty-three rose for all developing countries from 46 percent in 1960 to 57 percent in 1995. This has impaired political stability and social development in most of the nations. Paradoxically, the extreme left is hindering the momentum to decrease world poverty rates and is deaf to the continued suffering of the extreme poor. This research project will investigate the determinants of taxes paid by multinational corporations in developing countries.
However, in case of Pepsi, a famous cold drink multinational company, while for getting a product license in 1961 to produce Pepsi Cola in India it agreed to export a certain proportion of its product, but later it expressed its inability to do so. This has a potential disadvantage for the developing countries, especially when they are facing foreign exchange problem. Chapter one of this extended essay deals with the introduction of the subject matter, objective, significant, scope and limitation, and definition of the terminologies. List of Pros of Multinational Corporations 1. Investment in Infrastructure: With a large command over financial resources and their superior ability to raise resources both globally and inside India it is said that multinational corporations could invest in infrastructure such as power projects, modernisation of airports and ports, telecommunication. Transfer Pricing and Evasion of Local Taxes: Multinational corporations are usually vertically integrated.
They strive for a monopolized business. Multinational corporations do not operate with immunity; they are heavily monitored both in the United States and abroad. These companies cater to the wants of the already well-to-do people. Setting up Environment-Polluting Industries: It has been found that investment by multinational corporations in developing countries such as India is usually made for capturing domestic markets rather than for export promotion. Significant among these activities are their extension of opportunities for earning higher incomes as well as the consumption of improved quality goods and services to people in poorer regions of the world. Historically in India, multinationals made large investment in planlations whose products they exported.
Secondly, and more encouragingly, multinational companies are increasingly confident about returns on investment in developing countries, including Sub-Saharan Africa. Background of the study Government Expenditure no doubt is an important instrument for a government to control the economy of a nation. With these big businesses, huge markets have been created both domestically and internationally. Setting Up of Subsidiaries: The second mode for investment abroad by a multinational firm is to set up a wholly owned subsidiary to operate in the foreign country. However, it enjoys some independence from the parent company. Their relative size has also grown rapidly.
Firms become multinational corporations when they perceive advantages to establishing production and other activities in foreign locations. You are driving your Volvo car of 2002 model year, during this you are talking with your darling, by your new Nokia N97, and she promise to be at home after one hour and cook for you dinner. With this, I decide to write the extended essay title The role of multinational corporations in developing countries. Firms globalize their activities both to supply their home country market move cheaply and to serve foreign markets more directly. These companies cater to the wants of the already well-to-do people. The role of multinational development, creating avenue for direct investment, the effect on the host country and positive and negative aspect of multination corporation were review. Then there is the question of repatriation of profits by the multinationals.
This is a key consideration, particularly for countries coping with conflict and fragility looking to attract more and more diversified investment. They should be allowed to invest in infrastructure, high-technology areas, and in industries whose products they can export and if they help in generating net employment opportunities. It is true that multinational corporations take risk in making investment in India, they bring capital and foreign exchange which are non-debt creating, they generally promote technology and can help in raising exports. This is because they can impact the lives of people and set policies of governments. Their prime objective is global profit maximisation and their actions are aimed at achieving that objective, not developing the host less developed country. Therefore, role of multinational corporations in India and other developing countries have been criticised on several grounds. Child labor rates dropped from 27 to 10 percent in East Asia and the Pacific, from 13 to 9 percent in Latin America and the Caribbean, and from 14 to 5 percent in the Middle East and North Africa.
Multinational corporations have the ability to bring advanced technology to poorer countries, while bringing low-cost products to the wealthier ones. They may improve the skills of their workforce. The important question about multinational corporations is why they exist. This usually put most of the local businesses to likely cost and inconvenience. Somehow connected to the previous pro, the main reason for the success of multinationals is that consumers would usually purchase products and services on which they can go for minimum standards. These advances have combined in recent years with an increased openness on the part of government to foreign multination, as the economic benefits of a foreign presence to the host country have become more widely recognized. Multinational Corporation is also known as international corporation Wikipedia, 2011.