the negative impacts of TNCs operating in LDCs overweigh the benefits they bring

Transnational Corporations (TNCs) are firms that have the power to coordinate and control operations in more than one country, even if they do not own them. Many of the overseas branches of TNCs are located in less developed countries (LDCs), including newly industrialised economies (NIEs), recently industrialised economies (RIEs) and least developed economies. Generally, the socio-economical, environmental, cultural and political impacts brought by TNCs are more positive in more developed LDCs such as NIEs and some RIEs than other countries, mainly least developed countries.

In socio-economical aspect, TNCs do bring about benefits in the development of their host countries’ economies. According to cumulative causation, when TNCs outsource to a third party firm, there will be more jobs generated. Higher employment rate increases personal income of locals, thus generates more purchasing power for consumer goods, leading to growth and development of service industries, boosting the local economy. TNCs offer financial support to their host economies since they have to pay taxes to the local government and authorities. With this increased revenue, the government is able to invest in the development of better physical infrastructure, such as roads and electricity, and social services, such as health care and services. This in turn attracts more foreign direct investment (FDI) boosting overall economic growth. Taking China as example, 760 million rural people have migrated to urban areas for job opportunities. It is estimated that TNCs have helped to lift 200 million Chinese out of poverty.

However, it should be noted that boosting the economy of their host countries is not the TNCs’ primary objective, but a benefit brought about by...

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...argaining advantage that allows them to request to override these legislations and exploit the most out of the host economy. Desperately requiring FDI to boost the local economy, these countries provides tax breaks and subsidies, and slacken environmental regulations to create an attractive atmosphere for TNCs investments. As for more mature NIEs and RIEs, they have more efficient governments and stronger bargaining power which enable them to reap off greater benefits from the investments of TNCs and at the same time protect the local industries.

TNCs’ primary and ultimate objective is essentially to earn profits by taking advantage of natural resources, state policies, labour and markets. Although some advanced LDCs can secure their benefits brought by TNCs, many more lose out. Hence, the negative impacts of TNCs operating in LDCs overweigh the benefits they bring.