MNC & FDI
MNC
-Private Companies which operate in two or more National Countries
-MNC is also known as a transnational company
Advantages
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More Job Opportunities
More Investment in infrastructures
Developing Skills & Capitals
Developing to Tax
Disadvanatages
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Tax avoidance
Environmental Destructions
Moving Profit Abroad
IF MNC can avoid paying taxes in countries with well-developed legal systems,it may sugeest that less developed nations have little chance of getting their 'fair share' of taxes from MNCs.
Mining is often desturctive.The cost of pollution and other damage to the natural enviroment caused by the world's biggest companies would wipe out more than one-third of their profits if they were held financially accountable.
The profits made by MNCs abroad are often subject to repatriation.This means that profits are returned to the country where the MNC is based.
Reason of emergence of MNC/FDI
Economies of Scale
Access to Natural Resources/Cheap materials
Lower transport and communication costs
Access to customers in different regions
Developments in transport and communications have helped to drive the growth in MNC/FDI activity.Transportation costs have come down and the speed with which goods can be delivered has gone up.This makes distribution in overseas markets much more atttractive.
MNCs will be in better position to exploit economies of scale because they are so large.They can therefore lower costs.Such firms are so powerful they can place a lot of pressure on suppliers to lower their prices.
A significant proportion of FDI is targeted at the mining industry.Many African states have attractted FDI because they have large reserves of valuable resourcers.This is because in some countries the food needs of the population are not met by domestic producers.
One of the main reason why MNCs have developed succesfully is because they can sell far more goods and services in global markets than they can in domestic markets.Companies can make considerably more profit selling to the 7000 million people worldwide than they can selling to perhaps 50 million people at home
One of the main benefits of FDI is he employment created when MNCs arrive and establish factories,warehouses,shop and other business facilities.
IIf a country has inadequate road networks,prots,railway networks,bridges,power distribution,airports,telecommunications,industrial park and other facilities it is more difficult to do bussines in that country.Consequently,owing to the attractiveness of MNCs/FDI,goverment are more likely to invest in infrastructure in order to attract the attention of investors
MNCs provide training and work experience for workers when they locate operations in foregin countries.The arrival of MNCs may also encourage local people to set up businesses.
The arrival of MNCs will help to boost the stock of capital in host countries.One reason is because when a business sets up a new facility,such as a facotry, it is likely to install up to date technology.