Economic Growth

A multinational corporation is a business enterprise that operates in more than one country, but it is run from its home country. In many cases, a company that derives more than its quarter in revenue from other countries is considered a multinational corporation. While a direct foreign investment is when a business or an individual for that matter own 10% or more of a foreign company. Meaning the individual or the company can influence the company’s management, policies, etc.

Developing countries experience both benefits and costs when a multinational corporation is located in that country. Some of the befits include; bringing in capital, creation of employment and an increase in foreign exchange. However good the corporation is, it cannot have a meaningful linkage to the rest of the host economy failing to act as a leading sector that will lead development to the other sectors. Secondly, top good jobs are usually filled by foreigners. Being the most massive taxpayer, largest exporter and the major employer in a small country the corporation may gain more power than the host government which is quite a risk.

Investment in developing countries breaks the vicious circle of poverty. Hence investment is necessary, which can be earned by borrowing from world developmental agencies or allowing private investment. Both of them are important, but the application of each depends on the economic state of the country. If the country needs to invest in a long term project, e.g., construction of an electric train then borrowing from world development agencies would be preferable. But if the country wants to build on its economic growth and at a high rate, then private investment such as Multinational Corporation would be the best as debts burden the country and reduce its ability to purchase imports which lead to a poor business relationship with their key trade partners.