4.4.1 - Impact of MNC

Question 1

MNC Definition

Answer 1

a business that has OPERATIONS in MORE than ONE COUNTRY

Question 2

What are 4 BENEFITS OF MNCs ON the LOCAL ECONOMY

Answer 2

• IMPROVEMENT in INFRASTRUCTURE
• LOCAL LABOUR and JOB CREATION
• TRANSFER of SKILLS and EXPERTISE
• Puts PRESSURE on LOCAL BUSINESS’

Question 3

EXPLAIN how MNC’s BENEFIT the LOCAL ECONOMY through - INFRASTRUCTURE

Answer 3

• they IMPROVE COMMUNICATION LINKS Within a COUNTRY , e.g. Road, Rail, Port Facilities are UPGRADED and EXPANDED
• Helps to BUILD TRUST With the COMMUNITY and IMPROVE the QUALITY of HUMAN CAPITAL. Beneifts the MNC’s too

Question 4

EXPLAIN how MNC’s BENEFIT the LOCAL ECONOMY through - LOCAL LABOUR & JOB CREATION

Answer 4

PROVIDE Significant EMPLOYMENT and TRAINING to the LABOUR FORCE -> JOBS For LOCAL PEOPLE -> thus REDUCING Number of UNEMPLOYED and the Resultant Drain on Local Resources

Question 5

EXPLAIN how MNC’s BENEFIT the LOCAL ECONOMY through - TRANSFER of SKILLS and EXPERTISE

Answer 5

SKILLS and EXPERTISE -> HELP DEVELOP the QUALITY of the Host LABOUR FORCE -> Many MNC’s OPERATE Training SCHEME for Local People to Learn

Question 6

EXPLAIN how MNC’s BENEFIT the LOCAL ECONOMY through - Put PRESSURE on LOCAL BUSINESSES

Answer 6

PRESSURE on LOCAL BUSINESSES to MAKE IMPROVEMENTS
may PROVIDE some LONG-TERM BENEFITS -> e.g. MORE EFFICIENT and MORE INNOVATIVE Local Enterprises

Question 7

What are 2 NEGATIVES OF MNCs ON the LOCAL ECONOMY

Answer 7

• On LOCAL BUSNESSES
• ENVIRONMENTAL DAMGE

Question 8

EXPLAIN how MNC’s NEGATIVLEY AFFECT the LOCAL ECONOMY through - On LOCAL BUSINESS

Answer 8

• IF MNCs LURE WORKERS AWAY From OTHER BUSINESS by OFFERING BETTER CONDITIONS/WAGES
• MEANS that SOME People LOSE JOBS

Question 9

EXPLAIN how MNC’s NEGATIVLEY AFFECT the LOCAL ECONOMY through - ENVIRONMENTAL DAMAGE

Answer 9

• COMMUNITIES may be Left STRUGGLING To SURVIVE In Areas where FARMING ACTIVITIES are Almost IMPOSSIBLE
• MINING Indutry -> OIL SPILS -> Environmental HARM From OIL POLLUTION

Question 10

What are 2 BENEFITS OF MNCs ON the
NATIONAL ECONOMY through FDI FLOWS

Answer 10

FDI FLOWS:
- INCREASE in INCOME
- INCREASE in TAX REVENUE

Question 11

Explain BENEFIT to NATIONAL ECONOMY - FDI FLOWS

Answer 11

this INFLOW of MONEY is likely to BENEFIT the NATIONAL ECONOMY Through
- INCREASED INCOME
INCREASED TAX REVENUE

Question 12

Explain BENEFIT to NATIONAL ECONOMY - INCREASE in INCOME

Answer 12

• FLOWS of FDI should RESULT in HIGHER LEVEL of GDP for Host nation
• the EXTRA EMPLOYMENT and EXTRA OUTPUT would INCREASE ECONOMIC GROWTH and RAISE the LIVING STANDARDS

Question 13

Explain BENEFIT to NATIONAL ECONOMY - INCREASE in TAX REVENUE

Answer 13

• the PROFITS MADE by MNC’s are TAXED by HOME NATION –> INCREASES TAX REVENUE for Govt –> this MONEY can be SPENT on IMPROVING Govt SERVICES e.g. Healthcare, Education, Transport

Question 14

What are 4 NEGATIVES OF MNCs ON the NATIONAL ECONOMY

Answer 14

• DOMESTIC BUSINESSES may NOT be ABLE to COMPETE -> FAIL
• MNCs may use of TRANSFER PRICING and other TAX AVOIDENCE measures by SEEKING OUT LOCATIONS where TAXES are LOW -> REDUCING TAX REVENUE in HOST NATION
• PROFITS EARNED by MNCs MAY Be REMITTED BACK to the MNC’s BASE COUNTRY RATHER Than REINVESTED in the HOST economy.
• MNCs may be ACCUSED of IMPOSING THEIR CULTURE on Host Country at the expense of the richness of local culture. Might MNCs REDUCE CULTURAL DIVERSITY around the world as they continue to expand