The Role of Multinational Enterprises in Developing Countries

Topics: Developing country, Country classifications, Developed country Pages: 5 (1452 words) Published: November 1, 2013
The Role of Multinational Enterprises in Developing Countries According to the Oxford Dictionary, a developing country is “a poor agricultural country that is seeking to become more advanced economically and socially” (Oxford Dictionaries Online). Multinational Enterprises (MNEs) enable developing countries to achieve these objectives in several different ways. For instance, they introduce foreign products, inject money in the economy, and serve as a learning engine in the communities where they are located. In this essay, I will discuss the positive impact that MNEs have on developing countries through human resource development. MNEs support developing countries’ social and economic goals through the improvement of human capital by providing enormous numbers of employment opportunities, useful skills and training for their workers, and a business culture that is aligned with global standards MNEs bring hundreds of thousands of employment opportunities to their host countries. This contributes to a higher standard of living for individuals and to improvements in local economies. The unemployment rates in developing countries are generally very high. In 2011, Nigeria, Liberia, Haiti, and several other developing countries, had unemployment rates that were well above 20% (CIA – The World Factbook). MNEs reduce the income gap between first and third world countries by generating direct and indirect employment opportunities. For example, the International Labour Organization (ILO) found that, in 1976, approximately 2 million people were directly employed by MNEs in developing countries (Kumar, 1980, p. 6). One successful MNE that has made significant contributions to the economies of countries in the developing world is Volkswagen. Volkswagen supplies thousands of direct job opportunities to inhabitants of emerging countries. In their supply strategy, they explicitly state, “We are convinced that international work sharing, combined with free access to markets, supports growth and wealth in … developing countries. Responsible globalisation with the challenge of securing the environment-related and social-oriented services in an increasingly global setting, as well as further developing them with innovative and flexible solutions and projects, represents a contribution to sustainability across the world” (Volkswagen Konzern Startseite). Volkswagen has proceeded to establish an extensive production network that includes facilities in countries such as Brazil, South Africa, India, China and Mexico. In the city of Puebla, Mexico alone, a Volkswagen production facility employs 13,937 workers (Volkswagen Konzern Startseite). Some indirect opportunities associated with the presence of MNEs include increased business for local vendors, and demand for raw material production. One argument against MNEs is that host countries often become dependent on them. For example, an association comprised of six European firms was responsible for 66% of Nigeria’s exports and 70% of its imports (Chukwuemeka, 2011). Kumar (1980) stated that, “people have been socialized to look at outsiders for guidance and support.” It is true that developing countries rely on local MNEs to an extent. However, this reliance only occurs initially, as a result of a lack of wealth in their countries. Once host countries utilize the benefits provided by MNEs to improve their economies and become self-sufficient, they no longer rely exclusively on MNEs for sustainability. Furthermore, the dependence is double-sided. MNEs rely on developing countries for the local labour that they supply. Hence, a relationship between an MNE and its host country is mutually beneficial

MNEs also enhance the human resources of developing countries by supplying their employees with useful skills and training that are often unavailable in local firms. Skills, training and experience contribute to the personal development of individuals and, therefore, lead to long term economic...
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