CHAPTER ONE

1.0             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 existence has positive or negative impact on the development of the host country.

1.2             SIGNIFICANCE OF STUDY

The following were the significance of this study: -

i.                   It will be a source of knowledge expansion to me

ii.                 This research work will be my contribution to knowledge.

iii.              It will serve as source of data for others who may carryout research work on some or related topic in the future.

iv.               It will also serve as point of reference to policy makers in their relationship with matter concerning multinationals.

v.                 This research work will be a companion to decision makers on foreign investment in the country.  Mostly when the fire of foreign investment is at higher level in the country.

1.3             SCOPE OF THE STUDY

The essay work will cover the following areas of study in terms of the activities of multinational corporation, their roles as an agent of the development, their contribution towards development, the prose and coin i.e. advantage and disadvantages of their activities.  It will also examine their negativity in the area of profit send to their home ration.

1.4             LIMITATION

Due to the following constraints such as inadequate books or the topic posed a serious constraint on the write up some of the date needed for this write-up are not available at the time this write up services carious out.

It is prominent to note that no one has every thing to himself.  In everything, there arises some constraints, so it is in the case of this essay

i.                   Financial problem;  This problem is a great one especially in this present day economy recess in with inflation, sky rocketed prices of materials, where people are struggling to live within their limited resources.  This is especially applicable to a student who depends largely on others, among lost is that of transportation to and fro, the place of research, in some cases would have to trek for long distance.

ii.                 Time:  Time factor is another constraint, which the writer encountered.  Such as combining class activities i.e. test, assignments, lectures and exams with the project work other include the drudging of read and writing from one item to another in the attempt to accomplish the task.

CHAPTER TWO

REVIEW OF LITERATURE

2.0     INTRODUCTION

The essence of this literature review is to explore the various write-ups and publications that view multinational corporation as agents of development.

A multinational corporation is a company that has subsidiaries in several countries.  Their decentralized structure as well as their sheers size, often allow them to work without government constraints which small regional or national companies must companies must observe.

Developing nations attract multinational subsidiary operations due to a number of actors 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 fact, including low pay for woman workers, child labour and the absence of labour unions, also combine to make the developing nations ripe for prospect the presence of multinational in these countries improves overall standards of living.  The benefits of the relationship may be one-sided, but the economic problems facing these nations makes it difficult for them to be picky about their investors.

Firms become multinational corporation when they perceive advantages to establishing product and other activities in foreign locations.  Firm globalize their activities both o supply their home-country market more cheaply and to serve foreign markets more directly-keeping foreign activities with corporate structure lets firm avoid the costs inherent in arms length dealings with separate entities while utilizing their own firm specific knowledge such as advanced production techniques.  By internalizing what would otherwise be cross-boarder transactions, 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 the changes in market conditions.  Improvements information technology have reduced the impediments to exerting corporate control across boarder.  These advances have combined in recent years with an increased openness on the part of government to foreign multinational as the economic benefits of 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 firms brings, as well as technological transfer and improved productivity. The role of multinationals in spreading industry best practice is likely to be especially important in 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 (FBI) in recent years.  In 1999 FDI flow both in and out of OECD countries reached record levels.  Over 2.5 percent of their combined GDP for inflows and 3.0 percent for outflows.  Most FDI is between developed countries.  Since 1982, 75 percent of FDI outflows from OECD countries have gone to other members.

          HISTORY OF THE MULTINATIONAL CORPORATION

The opening of world trade 700Ad – 1600.  The most basic foundation of multinational corporation is trade between tribes, among regions, or across established  political boundaries.  Although accounts of the barter of goods or services among different people can be traced back almost as far as the record of human history, the opening of major global economic connections can be considered; the first prerequisite for modern globalization multinational corporation.

By about 100AD, it was possible, if sometimes dangerous and difficult, for merchant and travelers to traverse the “known” world from England to China and Japan.  These trade route were the first global links by which raw materials, food and luxury goods became available for their original by the 1600, the Portuguese and Spanish had opened sea route which spanned the globe.  Below I will like to briefly and partially select some major trading routes and system.

THE ROMAN TRADE ROUTES

From around 50BC to 500AD the Roman empire controlled the are surrounding the Mediterranean.   A single currency, the famous network of Roman Road and dozens of naval harbor i.e. the connected with the navy protection enabled transport and trade on a large scale within empire.  Areas with crop failures received grains, frontier towns were supplied, and the staples of Roman life (wine, olive oil, art, glass and weapons) were available throughout the empire.  The Roman also developed the sea route from Egypt to India, through which luxury goods were imported from the east. Spices, luxury hoods like teak, silk, porcelain and pearls came from India and China.  Trade with the Northern African interior, conducted through Aden, was in Ivory, rhinoceros horn and hides, tortoise – shell and slaves.  Rome paid for these luxuries in gold and silver in such amounts that there was a large drain of hard currency out of the empire.

AFRICAN TRADE ROUTES

By 1000AD northern Africa and especially the great ancient Egyptian civilization had already entered into large scale trade with Europe and Asia, and Islam dominated most of northern Africa.  Although primitive trans-sahara trade routes had always existed, sub-saharan Africa was still almost completely isolated form the rest of the world.  By 1500AD, a number of African kingdoms were well developed, centered around the Sudan, the Niger and Congo River, Zimbabwe, and the Horn of Africa Trade in iron copper, cattle and other goods between these states, especially between coastal and central states was well established.  Trans-saharan trade in salt, slaves, hores and other goods reinforced the spread of Islam, which arrived in tropical Africa.  The east coast of Africa was past of the Indian ocean trading network for Ivory Pottery, animals skins, and gold, and Arab traders settled a number of new town.

THE VIKINGS

While commonly considered, only as raiders and plunderers, another view of the Vikings maintains that their liberation and redistribution of wealth from kings and churches stimulated economic development from key to Dublin and that trading was as important as pillaging for Vikings living abroad.  Around 1000AD Dublin and that trading was as important center for Viking trade.  The ships coming in would carry wine and ceramics from England, silk from Baglidad, broken glass from Germany to make beads with silver from the middle east and wairus Ivory from arctic regions.  The Viking settle Iceland and greenland, and had early short lived settlements on new found land, Canada, and perhaps father south.  Norse artifacts found in Northern Canada indicate that the Vikings traded with native Americans.  It has been postulated that these trading relationship existed for centuries.

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