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Multinational Corporation (MNC), Multinational Corporation (MNC), sometimes called transnational sometimes called transnational corporation or international corporation, is corporation or international corporation, is a business that produces or distributes a business that produces or distributes products or services in one or more products or services in one or more foreign countries by establishing a branch foreign countries by establishing a branch or affiliate there. or affiliate there.

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A branch is a part of a company that is located A branch is a part of a company that is located in another country. in another country.

An affiliate is a company partially or entirely An affiliate is a company partially or entirely owned by another company. owned by another company.

MNCs engage in foreign direct investment MNCs engage in foreign direct investment (FDI)—that is, investment in one country by (FDI)—that is, investment in one country by citizens of another country. citizens of another country.

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Types of investment: Types of investment: Acquiring an existing company. (Airtel - AT&T.- Acquiring an existing company. (Airtel - AT&T.-

Cingular Wireless – Digicel).Cingular Wireless – Digicel).

Merging with another company (CIBC and Merging with another company (CIBC and Barclays = First Caribbean)Barclays = First Caribbean)

Creating new facilities or activities. These are Creating new facilities or activities. These are referred to as referred to as greenfield investmentsgreenfield investments. .

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Large multinationals have budgets that Large multinationals have budgets that exceed those of the country they are exceed those of the country they are operating in. operating in.

MNCs can have a powerful influence in the MNCs can have a powerful influence in the local economy. local economy.

They can have a significant impact on They can have a significant impact on government policy, mainly by threatening to , mainly by threatening to close their operationsclose their operations

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Multinational corporations play an important Multinational corporations play an important role in role in globalization

MNCs develop new products in their native MNCs develop new products in their native country and manufactures them abroad, often country and manufactures them abroad, often in Third World nations, where labour is cheap.in Third World nations, where labour is cheap.

Almost all the largest multinational firms are Almost all the largest multinational firms are American, Japanese, or West EuropeanAmerican, Japanese, or West European

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Levi's Factory in South AfricaLevi's Factory in South Africa

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MNCs in the CaribbeanMNCs in the Caribbean

Cable and Wireless Cable and Wireless DigicelDigicel Price Price

WaterhouseCoopersWaterhouseCoopers CourtsCourts Sunsail Club ColonnaSunsail Club Colonna SandalsSandals HiltonHilton Four SeasonsFour Seasons

Royal Bank of Canada Royal Bank of Canada First Caribbean PriceFirst Caribbean Price Scotia BankScotia Bank Stanford Development CompanyStanford Development Company TexacoTexaco ShellShell AlcanAlcan Tate and LyleTate and Lyle

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MNCs have always featured in Caribbean MNCs have always featured in Caribbean econmies. econmies.

The Colonial office encouraged UK companies The Colonial office encouraged UK companies to invest in the coloniesto invest in the colonies

After WW II, the region tried Industrialization After WW II, the region tried Industrialization by Invitation. Under this scheme companies by Invitation. Under this scheme companies were given incentives to set up industries in were given incentives to set up industries in the Caribbean e.g. tax holidays, factory sheds, the Caribbean e.g. tax holidays, factory sheds, exemption from duties on imports etc. exemption from duties on imports etc.

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Advantages of MNCsAdvantages of MNCs EmploymentEmployment – jobs will be created in construction, – jobs will be created in construction,

banking, manufacturing, or tourism sectorbanking, manufacturing, or tourism sector Foreign exchangeForeign exchange – – this will be generated from this will be generated from

tourism, bauxite, petroleum.tourism, bauxite, petroleum. Transfer of technologyTransfer of technology – workers can be trained – workers can be trained

while working in the MNC and then move to other while working in the MNC and then move to other firms with their skills. Also domestic producers can firms with their skills. Also domestic producers can copy the technology and best working practices of copy the technology and best working practices of the MNC. the MNC.

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TaxesTaxes – MNCs pay taxes and thus contribute – MNCs pay taxes and thus contribute to significant revenue to government’s to significant revenue to government’s finances. finances.

Development of infrastructureDevelopment of infrastructure – some MNCs – some MNCs may develop the infrastructure of the area may develop the infrastructure of the area where they are located, or government may where they are located, or government may do so to accommodate or attract the MNC.do so to accommodate or attract the MNC.

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Disadvantages of MNCsDisadvantages of MNCs

Closure of local firmsClosure of local firms – MNCS can dominate the – MNCS can dominate the domestic market which can lead to the closure of domestic market which can lead to the closure of domestic firms. They can produce and sell goods domestic firms. They can produce and sell goods and services cheaper than the domestic producers and services cheaper than the domestic producers thus lowering domestic profits and investmentsthus lowering domestic profits and investments

Repatriation of profitsRepatriation of profits – the bulk of profits may be – the bulk of profits may be sent back to their shareholders in the home country. sent back to their shareholders in the home country.

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Reduced gain for the hostReduced gain for the host country – country – governments will give tax concessions, rent governments will give tax concessions, rent free sites, government contracts to MNCs as free sites, government contracts to MNCs as incentives. The more they give the less they incentives. The more they give the less they gain.gain.

Non-transfer of technology and skillsNon-transfer of technology and skills – MNCs – MNCs may guard the skills and technology they may guard the skills and technology they possesspossess

Migration Migration – migrants may move to a country to – migrants may move to a country to seek employment. This may put a strain on seek employment. This may put a strain on the social services of the host country. the social services of the host country.

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Environmental damageEnvironmental damage – MNCs may exploit a – MNCs may exploit a country’s natural resources without any attempt to country’s natural resources without any attempt to preserve the environment. The increased use of preserve the environment. The increased use of herbicides and pesticides, the indiscriminate herbicides and pesticides, the indiscriminate dumping of waste generated by hotels and cruise dumping of waste generated by hotels and cruise ships will lead to environmental degradation. ships will lead to environmental degradation.

Political influencePolitical influence – MNCs often exert considerable – MNCs often exert considerable power and influence over political leaders, the police power and influence over political leaders, the police and civil servants. They may sometimes meddle in and civil servants. They may sometimes meddle in local politics. local politics.

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RecommendationsRecommendations

A new development strategy underpinned by A new development strategy underpinned by political will.political will.

The pooling of efforts and resources among The pooling of efforts and resources among Caribbean nationsCaribbean nations

Regional integrationRegional integration

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SourcesSources The Caribbean in the Global PoliticalThe Caribbean in the Global Political

EconomyEconomy, edited by Hilbourne Watson, edited by Hilbourne Watson Storm Signals, Storm Signals, Cathy McAfeeCathy McAfee The Caribbean – Survival, struggle and The Caribbean – Survival, struggle and

SovereigntySovereignty, Catherine Sunshine, Catherine Sunshine Consequences of Structural Adjustment: A Consequences of Structural Adjustment: A

Review of the Jamaican Experience, Review of the Jamaican Experience, Editor, Editor, Elsie Le Franc.Elsie Le Franc.