Imagine you are in charge of development for a developing country and were approached by a multinational corporation interested in locating in your country. Identify some of the benefits and some...

Imagine you are in charge of development for a developing country and were approached by a multinational corporation interested in locating in your country.

Identify some of the benefits and some of the costs to the host country from allowing a multinational corporation to locate in a country with a developing economy.

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pohnpei397 | College Teacher | (Level 3) Distinguished Educator

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The presence of a multinational company in a developing economy can certainly be a two-edged sword.  Such companies can bring short-term development, but they do not necessarily help in the long term.

In the short term, the presence of such a company is typically a good thing.  The company hires a relatively large number of local workers at relatively good wages.  It will (unless your government has made a deal where it does not have to) pay taxes, thus helping your government.  If your country has few jobs and a small tax base, this can be very beneficial.

In the long run, however, it may not be so great.  The firm might know that it has leverage over your government and use it to pay less in taxes or to evade things like environmental or safety protections.  The firm might only use your country as a source of cheap (relative to the rich world) labor rather than using locals as suppliers or giving them the ability to move up in the company. 

Multinational corporations do bring jobs to your country, but they are only using your country for as long as it is beneficial to them and they might not be helpful overall in the long term.

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