Lecture Highlights - Roles of MNC

Many are financial institutions or owned

by powerful people

The global ones are mainly high tech companies

+ impacts on locations, regionally or globally

Code of Conduct Principles on how they comply to good governance

principles relating to

Human RightsLabour Equality

Environment SustainabilityAnti Corruption

Key Role is providing FDI, usually via:• M & A• Equity holding• Financial Restructuring

Why MNCs invest in FDI?

Marketing Factors

Trade Barriers

Profit Attractions

Cost Factors

Investment Supporting

Country Attractiveness

Host Country Cost-Benefits

Host Country Costs

• Industrial dominance

• Exploitation of raw materials and cheap labour

• Bribery and corruption

• Interference in political matters

• Technological dependence

• Disturbance of economic plans• Cultural change

• Interference by home government through MNC

• Degree of government control may be less than intended

Host Country Benefits

• Improves Gross Domestic Product via repatriation of profits, royalties & fees

• Increases export opportunities

• Political advantages

• Job losses

• Net effect on imports & exports• Creating competitors

Allegations against MNCs

1. Control of technology transfer pricesInappropriate technology introduction to host country

2. Skip the country when regulation sets in

3. MNC control systems exert neo-colonist relationship with host country

4. Expose country sensitive information in global intelligence networks

5. Produce products that do not create or contribute social value to host country

6. Undermining national labour interests

7. Avoid paying taxes

8. Give best jobs to own boys, especially in HQ circles

POORCorporateSocial Responsibility

Code of Conduct Principles on how they comply to good governance

principles relating to

Human RightsLabour Equality

Environment SustainabilityAnti Corruption

Lecture Highlights - Trade Theories

1. 16th Century Mercantilism theory 2. Absolute Advantage (Adam Smith)3. Comparative Advantage (David Richardo)

19th Century onwards4. Factor Proportions Theory (Heckscher & Ohlin)5. Country Similarity Theory (Steffan Linder)6. Global Horizons Theory7. Product Life Cycle (Vernon)8. New Trade Theory9. Ownership Advantage Theory (S.Hymer)10. Internationalisation Approach (Buckley and Casson)11. Global Strategic Rivalry theory12. Porter’s National Competitive Advantage (diamond) theory13. Internalisation Theory14. Eclectic Theory (John Dunning)

Individual /Pair Presentation

Student Presents

The Rise of Bangladesh’s Textile Trade Case Study

Source: The Hindu, Dec 20, 2012

1. Why was the shift to a free trade regime in the textile industry good for Bangladesh?

2. Who benefits when retailers in the US source textiles from low-wage countries suh as Bangladesh?

3. What international trade theory or theories best explain the rise of Bangladesh as a textile exporting powerhouse?

4. How secure is Bangladesh ‘s textile industry from foreign competition? What factors could ultimately lead to a decline?

Bangladesh's textile industry – 1.51 mhttps://www.youtube.com/watch?v=CxKlnkp9SvQ

Ethnical Textiles – 3.31mhttps://www.youtube.com/watch?v=A3xrXC9wcZghttps://www.youtube.com/watch?v=hcYYLmcxavA

Martin Jacques - When China Rules the World – 10.04 mhttps://www.youtube.com/watch?v=Og8zBhDDkEQ

The Benefits

During Lecture, we saw the POSITIVES:

1. Capital Formation2. Technology Transfer3. Regional & Sectoral Development4. Internal Competition &

Entrepreneurship5. Favourable Effect on Balance of

Payments6. Increased Employment

Bangladesh's textile industry – 1.51 mhttps://www.youtube.com/watch?v=CxKlnkp9SvQ

At What Costs?

At Whose Costs?

Bangladesh has the advantage of not being China

The argument focus is Cost Advantage

China

Martin Jacques - When China Rules the World – 10.04 mhttps://www.youtube.com/watch?v=Og8zBhDDkEQ

The long version – 1.34 hrshttps://www.youtube.com/watch?v=3G1EyvRZmOs

Bangladesh China

Low cost factors Is the largest world’s exporter sunk FDI

But still MNC have concerns of increasing cost factors

The CostsDuring Lecture, we saw the NEGATIVES:

1. Industrial dominance

2. Exploitation of raw materials + cheap

labour

3. Bribery and corruption

4. Interference in political matters

5. Technological dependence

6. Disturbance of economic plans

7. Cultural change

8. Interference by home government

through MNC

9. Degree of government control may

be less than intended

10. Technology transfer may be too expensive or inappropriate (eg old)

11. Can move out when country regulates

12. Products are for overseas markets and may not benefit local social needs or value

13. MNC’s home country’s labour /employment interests are undermined

14. Avoid taxes

15. Best jobs given to MNC’s privileged people

Ethnical Textiles – 3.31mhttps://www.youtube.com/watch?v=A3xrXC9wcZghttps://www.youtube.com/watch?v=hcYYLmcxavA