The Negative Impacts Of Tn Cs Operating In Ld Cs Overweigh The Benefits They Bring

1105 words - 5 pages

Transnational Corporations (TNCs) are firms that have the power to coordinate and control operations in more than one country, even if they do not own them. Many of the overseas branches of TNCs are located in less developed countries (LDCs), including newly industrialised economies (NIEs), recently industrialised economies (RIEs) and least developed economies. Generally, the socio-economical, environmental, cultural and political impacts brought by TNCs are more positive in more developed LDCs such as NIEs and some RIEs than other countries, mainly least developed countries.

In socio-economical aspect, TNCs do bring about benefits in the development of their host countries’ economies. ...view middle of the document...

Compared with mature NIEs, those less developed countries are more vulnerable as they have less bargaining power. In the hope of leveling up tourism infrastructure in Thailand, the government depends on TNCs which possess the necessary capital to invest in the construction of these facilities. However, around 60% of the income generated goes to the TNCs that own many of Thailand’s hotels and restaurants. Contradictorily, in order to combat the footloose nature of TNCs, many mature NIEs have put in place regulations to protect local firms and industries. For example, Nestle in South Korea being required to use Korean-made machinery. This is in order to increase the multiplier effect of TNCs on the local economy, reducing profit leakage overseas.
By selectively investing in certain regions (e.g. Southeast Asia) while largely bypassing others (e.g. sub-Saharan Africa), TNCs are active agents in increasing global wealth divide. Even within the country itself, income gap is widened much due to TNCs. For example, rural-urban migration in China has created urban bias to economic development, marked by China’s high Gini coefficient of 0.421. Being profit-oriented, once a TNC finds another place with cheaper labour costs or better profit to gain, it will relocate its branches, leaving many people jobless. More developed LDCs with more effective policies are less affected, as they have more skilled worker, better transportation and communication systems and infrastructure to retain investment. An example will be the Pearl River Delta in China where many TNCs locate. Even though there are less labour forces but higher wages now, it remains attractive to TNCs. Mature NIEs also opt for attracting TNCs to locate regional headquarters there for greater benefits. Singapore is the major destination for many regional hubs in SE Asia, for example, Linkedln.
Socially and environmentally, LDCs can bring about great harms to LDCs, especially to countries with weak government structure and unenforced policies. Oftentimes, many TNCs choose to shift their environmentally harmful and unsafe operations to countries that have less stringent environmental regulations. These operations often result in pollutions, which may also indirectly cause the health of the locals to suffer, especially if the populations are highly dependent on farming and fishing. Due to Nigeria having an oil-based economy, large oil TNCs such as Shell has a huge bargaining power and influence in the country. Gas...

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