Home > dgCommunities  > Special Report: Foreign i... >

Search by Keywords: Advanced Search The requested resource (/editor/default/) is not available About this Report This Special Report provides a multi-sectoral perspective on a current issue in development. Participating in this Special Report are our online communities focused on: Afghanistan Reconstruction Aid Effectiveness Business Environment Culture Environment Foreign Direct Investment Food Security Gender Governance Information and Communication Technologies Indigenous Issues Knowledge Economy Millennium Development Goals Microfinance Poverty Trade Water Resources Management     Our next Special Report will focus on public sector transparency. Stay tuned! Become a Development Gateway member, and you will be notified of our upcoming reports. Sign-up! See previous Special Reports here Special Report The requested resource (/editor/default/) is not available Development Gateway Member Comments Controversial questions surround the role of multinational corporations in developing countries. From the corporate perspective –are the risks too high? the markets too small? Is it really possible to make a profit in the least developed countries? -And from the policy and societal perspective –how do you attract foreign investors while at the same time creating your own private sector and protecting your people and the environment? With so many seemingly diverging interests -is a win-win scenario possible? Here is what our members had to say: Peter Chisawillo "The balance between attracting FDI and developing a local vibrant Private sector is delicate. How much of the economy is perceived by the locals to be domestically controlled? What benefits are derived from FDI: in terms of direct employment, other jobs as secondary employment, government revenue, infrastructure development, utilities (development and consequential revenues). How much of the management skills and business skills filter to the domestic private sector and does not frustrate the domestic private sector. If these issues are addressed by policy makers and all stakeholders it is possible to strike a win-win scenario. This may not be possible in every specific investment but may be possible by targeting specific sectors to policies likely to avoid marginalization of the local private sector." Peter Chisawillo Clemence Lori "The Least Developed Countries (LDCs) have to develop themselves. They need not attract foreign investment. Foreign capital is for foreign profit and foreign development not development of the LDCs. Attracting foreign investment into the LDCs to develop the LDCs is a development fallacy." Clemence Lori Karsten W. Parchmann "Profit is the source and the key of development. It is also the motor and motivation for the people all over the world." Karsten W. Parchmann Kazeem Akingboye "It is really possible to invest profitably in the developing countries, but such should be done with caution especially in a place like Nigeria because of poverty, high level of corruption, decaying infrastructure and political instability. There are promising markets in some places like Nigeria, South Africa and Ghana. A win-win scenario is feasible by way employment generation, social infrastructure, sprawling consumption and cheap supply of inputs. You can attract foreign investment through improved domestic security and accountability and liberal red-tapism." Kazeem Akingboye Efefiong Akpan "I do know in Nigeria, we at the micro-entrepreneurial level can hardly get direct foreign investments because of the stigma of financial crimes, However by the time investors overlook government bureaucracy in Nigeria, and deal directly with genuine and provable micro-entrepreneurs by opening information flow amongst individuals like at the World Electronic Forum, potentials will be discovered mostly in the private sector, therefore more accurate business information and possible profits. Otherwise official corruption remains a perpetual problem!" Efefiong Akpan Victor Burunsus "Making profit in least developed countries - possible and even easier than in developed countries that are saturated markets with exacerbated competition. Yes, the risks are high, but the perception of the risks at least by local business people is that these are acceptable or these justify the high returns. Markets might be indeed to small, but often times these are high margin markets while for the same products in more developed countries the markets are low margin. The dilemma is attracting foreign investors while developing a robust domestic private sector. My take on that is that foreign investors are to be attracted primarily in those fields requiring high contribution of modern technology (not obsolete one in West that can go for new in the less developed countries). That would create many subcontracting opportunities for local SMEs. One of the passkey for foreign investors could be allowing setting up businesses that would be ecologically certified ISO14000." Victor Burunsus Stephen Settimi "It's clear that profit can be made in LDCs and LLDCs but if it's at the expense of further galvanizing the stasis of poverty and inequities that exist in these regions by exuding profits from embedded delivery systems [health delivery systems in particular] that have as their consumers, the poor, or by absconding with natural resources or intellectual property through unfair or predatory practices, then indeed the risks are far too high. Daily stories around the globe of violence, disease, famine, and other conditions that engender discontent and worsening of already pitiful conditions exhort the conundrum of this ethno-centric business model. The historical, North-South business relationships that were initialized at time of colonization, that survived the 1960-80’s wave of independence, and which still continue today, leave these countries debilitated and unequipped to build capacity, a requisite to generating wealth and a prelude for newly emerging market states. The current model is essentially one of extortion: It leverages the labor intensive sectors of the South to serve as a conduit for maximizing profits of the capital intensive sectors of the North which then offer product owned by the North for purchase by the South. It’s the ol’ company-owned town model. Whereas this is an exaggeration to some extent, the practice all the same reinforces a subservient, often adversarial co-dependency between North and South and does little for trans-South development and generally results in a net loss of empowerment, cultural identity and diversity, and sense of self-deprecating sense of nation-state. Ultimately, the practice stifles creative initiative an elemental requirement for participatory capitalism so essential for economic development and business growth." Stephen Settimi Kester Beale "MCIs (Multinational Corporate Investments) are critical to the development of the LDCs (Least Developed Countries). The injection of capital into their economy, the training and employing of their citizenry, the increase in production standards, the increased access to research data etc. are only a few of the benefits that may be gained by the inclusion of MCIs into an underdeveloped economy. Profits may take a number of years to be realised, and will be dependant on a number of factors, not the least of which will be the attitude of the LDCs populace with respect to the inclusion of multinational entities. The Government of the LDC has a major role to play as it pertains to this attitude hurdle. What then is the benefit to the multinational entity? The creation of a market that hitherto had not existed and the subsequent increase in living standard over a period of years can be used to create customer loyalty. Trinidad & Tobago circa 1970, heading into an 'oil boom'. Texaco was the multinational who introduced the systems & processes that bought T&T to it's present level of respectability within the Caribbean, and while they did not sufficiently weather the storm to the present day, they paved the way for Schlumberger, BP etc. to gain easy acceptance by the wider populace. They did not receive the 'Texaco must go' treatment, meted out by many T&T trade unions and the nation in general. Sub-contracting, downstream industries, and to draw from the colloquial venacular 'give a man a fish and he has food for a day; but teach a man to fish, and he has food for a lifetime'. Therfore, rather than soley protecting the interests of the local citizenry, include their interests and their environment. A win-win scenario is possible, but only if the citizenry is included in some form of brainstorming process and other means of fostering a feeling of ownership towards the entire project/enterprise." Kester Beale Ijaz Ahmad "It is very much possible to make profits in the LDCs. The question is sharing of profits by MNC and sharing of marketing benefits with the primary producers. A win-win situation could be a possible outcome if foreign investment leads to technology transfer and upgrading human skills. FDI could be attracted through removal of constraints and consistency in policy regime. Environment of course should be the primary concern of MNC investing in LDCs." Ijaz Ahmad Rianne Ten Veen "Over 50 of the 100 richest entities in the world are now companies, not governments. As 'money talks' this means companies have a huge arm twisting potential (and reality!) They also have a great ability for keeping the truth from us and pretend everything is 'hunky-dory'. But let's face it: most companies just want to make money and money alone, they really don't care a bananas what will happen to the world during and after their exploitation..." Rianne Ten Veen Gacii Waaciuma "Past experiences have shown that these multinational corporations make a killing in their profit from their operation in the third world countries. The contribution from this is more than 40% of their total turn-out in each year. Considering that in each area of their operation they usually have a monopoly, I would say that the risk is too high! Once a competitive stable environment is created, through a stable government, then its easier to attract foreign investment, through liberal incentives and removal of government intervention or control. By encouraging local private joint investment with strategic international partners, a robust economic growth can be achieved. The government should play the roles of supervisory and of searching much needed foreign investment by giving good incentives and a stable environment." Gacii Waaciuma Narayan Bhandari "Political stability, sound financial regulation and civil society support is necessary for the Big Corporate investment. Even in physical development projects we have lots of example of failures. I think without strong political commitment and sound rule of law it would be precarious to invest. Without a clear picture of 'local knowledge' it is very difficult for foreign investment to flourish. It is better to support local private sector and their interests. In my view, local knowledge and public interests are the most important factors for investment." Narayan Bhandari Louise F. Montgomery "My concern is how would outside development money, geared primarily if not exclusively to profit foreign firms, benefit the people in a nation? If it means only slave wages and long hours for women bent over machines while children go untended, then I would oppose it totally. Wal-Mart, for example, is one of the biggest exploiters of Chinese and other international workers, who tend to be mainly women. Wal-Mart buys so much from China that it is starting its own ship line to carry goods from there. The result is that young women from rural areas in China are sent by their impoverished families to industrial centers where they work long hours, live in horrible company-provided housing and have just enough to eat to keep them working. Many of them die. Interestingly, North Korean women who were among the first to flock to factories producing for export got smart; they unionized and got pay raises. Guess what? The international corporations pulled out and went to places where women were willing to be exploited. Unfortunately, the percentage of earnings and wealth in the hands of a few is growing, and the percentage living below the poverty line is increasing. I believe that ensuring appropriate wages should be the responsibility of the entire society, including enlightened corporations. However, in reality, I don't believe that corporations are interested in being ethical or in helping to create just and healthy societies. Therefore, I believe that labor unions -with full rights to organize workers and with the full support of government (legislation and courts) to protect those rights -are essential. I would wish first for strong unions to protect the rights of workers and laws protecting women against exploitation. If, under those conditions, foreign firms want to invest, great!" Louise F. Montgomery Graham Lowe "Do governments and elites really care about the robustness of the local private sector? Unless it is to protect their own privileges? Do they really care about the local citizenry or the environment? If they do not care, can this perspective truly be called policy? While working in Guinea, WA, I observed a phenomenon called "decentralisation". Here, a ruling kleptocracy found that the returns from foreign corporate investment in bauxite mining no longer gave surpluses that could be used to keep the population mollified. Cleverly the government gave taxation rights to local communities to pay for what little had formerly been passed on for infrastructure and social investment (clinics, education). Was this an emergent democracy or a callous retrenchment? Would repressive means be used when local communities assumed the mantle of responsibility? Alternatively, can a truly robust domestic private sector be developed without foreign investment and the consequent access to foreign markets? The size of markets does not constrain multinationals, but rather the least developed, national proto-industries that can cannot generate economies of scale and can only create economies of wages, economies that will slowly be eroded as national economies develop and wage-earner demands increase. Multinational corporate investment (MCI) is too large to reach the local private sector operators that can best contribute to a multi-faceted economy that will be robust and have the strength to create value rather than export it. Is not MCI the economic equivalent of the great agricultural monoculture fiascos of the last century... will we never learn? (Will we never learn that only local scale, diversified production has the strength and adaptability to survive global economic downturns or market weaknesses? Local operations given over to producing for MCI brokered markets will reap disaster when the MCI leaves because the government has become too greedy or can simply no longer afford to grant the tax holidays that induced multinationals to invest in that country in the first place.I do not say that foreign investment cannot be useful, simply that it must be well regulated, provide for local training and development and be able to show a profit after the removal of tax havens and holidays." Graham Lowe Kerrie Nelson "Of course its possible for multinational corporate bodies to make profits in the least developed countries - there is already evidence that it happens (mining, logging etc). The question is how do you regulate it so that a robust domestic private sector develops at the same time where the local citizenry is at the centre, and microeconomics is part of the deal? " Kerrie Nelson Mpumi Bikitsha "From the policy perspective, there is undoubtedly so much to attract foreign investment into the least developed countries to develop them, but there is always the seemingly unguarded element of corruption as soon as money changes hands, and money always goes to the same hands. If good governance were to be effected as well as it is written about, the level of risk would go down and therefore a robust domestic private sector could develop. It becomes a catch-22 situation when it comes to protecting the interests of the local citizenry and the environment, especially in the property area. Property prices are killing South Africans because the dollar and pound are making it ridiculously easy for their people to buy here and not vice versa. Another example is where an overseas developer eyes the wildcoast and sees a golden opportunity to put up huge modern structures, hence destroying the environment etc. My final word is, clean up corruption and let's see true results of foreign investment." Mpumi Bikitsha S.T.Chandrasekhar Babu "Of course there is a profitable business proposition in the developing countries. But it depends on how large and deep the potential markets which we propose to enter are. Initially the margin may be less or even negative, but it is basically penetrating strategy, and it is a win-win situation. Sustainable long term lead and quality over competitors' products give us strength to continue. Risks are 50-50. Foreign investment and strengthening domestic private sector development is possible with partnership and collaboration, but not with direct competition. Environmental protection and social responsibility should be visible and commitment should be at the core." S.T.Chandrasekhar Babu Nagarjuna Boppana "It is challenging for the multinational corporations, and at the same time, it is also difficult for the host countries to gain from this, due to the fact that market institutions are not well developed and the state's role in providing employment and investment is still expected by the people. So multinationals invest in capital intensive industries and profit making ventures; it is not wrong from the business point of view, but the economic structure of nation is not ready for the market institutions and demand and supply point of view. Attracting multinationals by the developing nations becoming more competitive and relaxing from the globalization point of view paves the way for multinationals to invest in these countries, but the nation's immediate requirement is foreign exchange, not any other thing. The win-win situation is therefore from the point of view of foreign exchange to the host country and markets for the multinational companies in some countries, which are big like China and India, Brazil, Egypt etc. Private sector development depends mostly on the per capita income of the host country, but developing economies, due to their drawbacks like illiteracy, unemployment and health problems and mainly the population explosion, private sector development is not successful. The business environment is changing, and becoming attractive for the multinationals due to their large market size. Developed economies market situation is saturated and more competition. So multinationals could benefit from this. At the same time, the developing economies also would benefit if they prioritize the multinational Investments in important lines of business and areas." Nagarjuna Boppana The requested resource (/editor/default/) is not available Email this page Sign-up Quick Poll Sign-up here! Subscription is free and allows you to receive email newsletters and alerts, access a comprehensive member directory and network with other development professionals. Sign-up here Must Reads Promising business models in developing countries Balancing the interests of foreign investors and domestic enterprises Who is accountable for what? Foreign investment must empower the poor Dr. Jaslin U. Salmon, National Coordinator of the Poverty Eradication Program, Jamaica. Read Corporate Social Opportunity? George Carpenter, Director, Corporate Sustainable Development, Procter & Gamble, United States Read  Very Poor Need Upgraded Skills Reema Nanavty, Director, Economic and Rural Development, SEWA, India Read Partners In Numbers

Terms & Conditions | Privacy | Editorial | Copyright Notice | Make this Your Home Page