Multinational companies (MNCs) = firms that own, control, or manage production or distribution facilities in several countries 25% of world output Problems created by MNCs in the home country loss of unskilled and semiskilled jobs creation of some higher qualified jobs at home, i.e. clerical, managerial, technical securing of jobs at home through improved competitiveness export of advanced technologytendency of MNCs to concentrate R+D in the home nation loss of taxes - - -

Problems created by MNCs in the host country domination of host countries' economies - foreign affiliate acts according to MNC's and home country's policies Effect on national tastes e.g. no exports to Iran e.g. Coca-Cola, McDonald's - inflow and outflow of capital not controllable - brain-drain to home nation because of concentration of R+D there keeps host country technologically dependent - crowding-out (buying-up) of domestic industries trend: monopolies/oligopolies Very bad for emerging industries in developing countries

Special problems for developing countries - overexploitation of natural resources - use of capital-intensive production(instead of employing host countries' workers) - lack of training of local labour - Exploitation of poor standards for working conditions low wages, long working-hours,poor safety standards etc. - creation of "enclave" economies foreign investors just exploit the natural resources, but don't employ many local workers, profits are repatriated

Counter-measures by host countries Canada: higher taxes on foreign affiliates with less than 25% Canadian interest India: specification of sectors where direct FI is allowed + rules for operation Some developing/ emerging countries: only joint-ventures allowed, i.e. with local equity participation, e.g. China rules for:   transfer of technology  training of domestic labour  limits on the use of imported goods  remission of profits  environmental standards Severe step: Nationalization of foreign production facilities disadvantage:bad influence on the future flow of direct FI Efforts: International code of conduct for MNCs