Is TNC a blessing or a curse to host countries?

1. Is TNC a blessing or a curse to host countries?

2. Brainstorming • What benefits do TNCs bring to society in host countries? Have the people improved in their living standard due to the arrival of TNCs? • Will the local economy be benefited in a long run? • What problems are created? What can the government do about them?

3. Socially speaking • Creates jobs esp. with assembly industries (electrical goods & electronics) + labour-intensive industries (clothing, sports goods & toys) • Local workers receive a guaranteed income • Improves level of education & technical skills of the people • Bring new technology to the country (when they develop motor vehicle manufacture, engineering & chemicals) • Encourage improvement of the transport infrastructure e.g. roads, airport, that can be used by local people or other companies

4. Economically speaking • Bring investment & foreign currency to the country • Increase Gross National Product / personal income has multiplier effect. • It leads to an increaseddemand for consumer goods • growth of new industries • Widens the economic base of the country

5. A curse to host countries? • Few jobs when the industries are capital-intensive. Small number employed when compared with amount of investment • Local workers are usually poorly paid • TNCs are less caring for the workers --insufficient attention to safety & health factors & the protection of the environment (exploiters of poor people)

6. A curse to host countries? • Most of the profits go overseas. The country gains little financial benefits. Multinational plants are not integrated into the economy but more export-oriented & strategy of TNCs • Only a limited range of industries are developed. It is not for the best needs of the country (ELDCs & NICs). TNCs only think about their own profit. • GNP grows slower than that of the parent company’s headquarters, widening the gap between EMDCs and ELDCs.

7. A curse to host countries? • TNCs may affect the future of developing countries • TNC economic dominance can discourage local investment & damage indigenous enterprise • Over-dependency on the investment of TNC may result in the host countries losing control of its own economy. This is because the TNCs make decisions for its own profit and not the long-term economic prosperity of the host countries

8. A curse to host countries? • Branch plants are subject to closure & disinvestment as decisions are made outside the country, • During a recession, branch plants are the 1st to close. • TNCs can easily switch production to other countries • Direct flow of government funding away from other sectors of the economy – particularly agriculture into providing incentives e.g. Enterprise Zones to attract multinational plants.

9. Impact of globalization on MDCs

10. Impact of TNCs in MEDCs • Globalisation has exposed many traditional industries in MEDCs to competition & contributed to deindustrialization during the 1970s and 1980s. • With FDI from TNCs, it helps to start reindustrialization in MEDCs to a certain extent. • EXAMPLE: TNCs such as Samsung, Toyota have set up factories in UK to serve EU market by FDI in order to avoid trade restrictions. They are exempted from tariffs & quotas as the goods are not exported from S.Korea & Japan.

11. Impact of TNCs in MEDCs • By increasing global interdependence, any economic downturn affecting a leading country or group of countries, is likely to have a worldwide impact. • EXAMPLE: the East Asia financial crisis made the LG withdraw the project of setting a consumer electronics factory in Newport in Wales. • Shift of economies: increasingly dominated by financial services, media & communication industries • At the start of 21st century, on-line shopping & banking via the internet is a serious threat to high street retailing & bank branches.