Essay on the Effects of MNCs on the host country

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Multinational Corporations no doubt, carryout business with the ultimate object of profit making like any other domestic company.

According to 1LO report “for some, the multinational companies are an invaluable dynamic force and instrument for wider distribution of capital, technology and employment: for others they are monsters which our present institutions, national or international, cannot adequately control, a law to themselves with no reasonable concept, the public interest or social policy can accept MNC’s directly and indirectly help both the home country and the host country.

Advantages of MNC’s for the host country :

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MNC’s help the host country in the following ways

1. The investment level, employment level, and income level of the host country increases due to the operation of MNC’s.

2. The industries of host country get latest technology from foreign countries through MNC’s.

3. The host country’s business also gets management expertise from MNC’s.

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4. MNC’s break protectionalism, curb local monopolies , create competition among domestic companies and thus enhance their competitiveness.

5. Domestic industries can make use of R & D outcomes of MNC’s.

6. The host country can reduce imports and increase exports due to goods produced by MNC’s in the host country. This helps to improve balance of payment.

Disadvantages of MNC’s for the host country

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1. MNC’s may transfer technology which has become outdated in the home country.

2. As MNC’s do not operate within the national autonomy, they may pose a threat to the economic and political sovereignty of host countries.

3. MNC’s may kill the domestic industry by monopolizing the host country’s market.

4. In order to make profit.MNC’s indiscriminately may use natural resources of the home country indiscriminately and cause depletion of the resources.

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5. A large sums of money flows to foreign countries in terms payments towards profits, dividends and royalty.

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