Is multinational is boon or bane?

Answer 1

Multinationals is both bane and boon and it is equally bane and boon, here are some points with which i can support my point.MNCs has made entire world a global village they also increased inter connectivity among nations they also produced quality products at nominal rates but you may get one doubt that we have so many good things about MNCs but why we are calling them bane why not only boon but these have their drawbacks too they are like native corporation crumbles under the competition of MNCs they became national security threat and they produces no profit to the country in which it is established except taxes remain in home country not only these there are many more drawbacks like global warming, political influence , unethical practices.

Here are some suggestions that must be followed in every country, like strict laws which favours the home country economic conditions ,more concentration of govt. on indigenous industries and offering financial support and taking less taxes .

Answer 2

1) WHAT IS MNC’S ?

Ans) MNC is most simply defined as a corporation or enterprise that conducts and controls productive activities in more than one country with the head office being established in a developed country.

2) ISSUES OF MNC’S ?

ANS) It is believed among many economists that MNCs fill various gaps within a host country's economy.

i)

The first and most often cited one is that, when domestic investment and savings doesn't meet the required rate of growth in the economy, the gap in investment is filled by the MNCs' investment.

ii)

Secondly when the targeted foreign exchange is not met by the net foreign exchange derived from imports and exports together with net public debt, the gap is constituted by MNCs' net exports and capital inflow.

iii)

These giant companies also fill the gap between targeted government tax revenues and locally raised taxes.

iv)

Lastly the gap of management skills, entrepreneurship and technological skills are believed to be filled by the MNCs.

Issues:-

i)

Even though it is said that MNCs provide capital and savings, they charge a higher interest on capital borrowed by the government in the host country.

ii)

Apart from that, MNCs repatriate the profits to their home country apparently hindering the re-investment possibility of those profits in the host country.

iii)

Further MNCs import the required intermediate goods without purchasing from domestic producers, thereby reducing the opportunity to grow for the domestic producers. In the long run the recipient country's current account balance may worsen because of the substantial importation of intermediate goods. Furthermore the capital account's balance may worsen because of repatriation of the profits to overseas companies.

iv)

The expected contribution from the tax may be less than it should be as a result of liberal tax policies vested upon MNCs.

v)

The salary structure of MNCs increases the unequal income distribution in developing countries.

vi)

The cultural problems arise in the industrial zones where the MNCs are being set up.

vii)

The "Transfer Pricing" phenomenon is used to avoid high rates of taxes in some host countries by transferring the inter company sales (inter company sales among subsidiaries) from high tax countries to low tax countries at artificially high prices.

viii)

MNCs use their economic power, advertising effect, superior technological knowledge, worldwide contacts and competition to wipe out the host country's small-scale entrepreneurs from their business