ROLE OF MULTINATIONAL CORPORATIONS IN DEVELOPING COUNTRIES

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ABSTRACT

This is the fact that under proper management of economic policies, multinational corporations are the bed rock for developing countries and national integration as it provide greater opportunities by exploration and discovery of our major mineral resources were made possible by the MNCS(Multinational Corporations). And also, our major transport networks were mostly developed by the corporations which provides development in many countries.

Unfortunately, this corporation can’t play this expected role largely due to financial problem. Multinational corporation concentrated in boosting agricultural product which form the ed rock of most developing countries economy. Therefore, financial constraint serves negative attention from multinationals.

With this, I decide to write the extended essay title (The role of multinational corporations in developing countries). To explore various positive aspect of development.

Chapter one of this extended essay deals with the introduction of the subject matter, objective, significant, scope and limitation, and definition of the terminologies.

In chapter two, some related literature review on multination corporation were review, some definition of multinational corporations, effect of multinational corporation on the investing country. 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.

Chapter three deal with summary, conclusion and recommendation.

CHAPTER ONE

Introduction- – – – – – – – – 1

1.1 Objective of the study- – – – – – – – 3

Significant of the study- – – – – – – – 4
Scope of the study- – – – – – – – 4
Limitation – – – – – – – – – – 5

CHAPTER TWO – Literature Review

Introduction – – – – – – – – – 6

2.1 Definition of multinational Corporation- – – – – 25

The Effect of multinational on the investing country- – – 25
The Effect of Host Country – – – – – – 27
Creating avenue for direct investment- – – – – 29
Positive Contribution of MNCS to the Nigerian economy – – 30
Negative Aspects of the Activities of MNCS of the Nigerian

Economy- – – – – – – – – – 34

Needs for Government Control of Multinationals; – – – – 41

CHAPTER THREE -Summary, Conclusion and Recommendations

3.1 Summary- – – – – – – – – – 46

Conclusion- – – – – – – – – – 47
Recommendations- – – – – – – – 47

Bibliography- – – – – – – – – 49

CHAPTER ONE

INTRODUCTION

A multinational corporation is a company that has subsidiaries in several countries. Their decentralized structure, as well as their degree size, often allows them to overstep governmental constraints which smaller regional or national companies must observe.

Developing nations attracts multinational subsidiary operations due to a number factors such as cheap labour, low taxation and less vigilance concerning workers rights and environmental protection. They are made to contribute to the social security net (i.e. welfare, unemployment insurance, e.t.c) other factors including low pay for woman workers, child labour, and the absence of labour unions, also combine to make the third world ripe for exploitation.

The presence of multination in these countries improves overall living standards. The benefits of the relationship are most often one sided, but the economic problems facing these nations makes it difficult for them to be picky about their investor. Firms become multinational corporations when they perceive advantages to establishing production and other activities in foreign locations. Firms globalize their activities in foreign locations. Firms globalize their activities both to supply their home country market move cheaply and to serve foreign markets more directly.

Keeping foreign activities within the corporate structure lets firms avoid cost inherent in arms length dealings with separated entities while utilizing their own firm specific knowledge such as advanced production techniques. By internalizing what would otherwise by cross-boarder transaction multinationals can bridge the information obstacles that often hinder trade. For example, they may be able to move carefully monitor product quality or worker conditions in factories they own than in those of contractors, or adapt the composition of output more quickly to change in market condition.

Improvements in information technology have reduced the impediments to exerting corporation control across boarders. 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. These benefits include the increased investment and the associated jobs and income that the multinational firm brings, as well as technological transfer and improved productivity. The role of multinationals in spreading industry best practices is likely to be especially important services, many of which are not easily traded across national boundaries.

Evidence of the heightened role of multinationals can be seen in the quickened pace of Foreign Direct Investment (FDI) in recent years in 1991 FDI flows both in and out of other European country development (OECD), reached regard level; over 2.5 percent (%) of their combined gross domestic product (GDP) for in flow and 3.0 percent for outflow. Most of foreign direct investment is between developed countries, since 1982, 75% (percent) of FDI out flow from OECD countries have gone to other OECD members.

SOURCE: United Nation Multinational Corporation in world development New York (2000).

1.1 OBJECTIVE OF THE STUDY

The main objective of this study is to critically look into the activities of those multinational corporation in their host nations mostly developing nations if their