Question

What are the effects of multinational corporation in the Philippine Economy?

Answer 1

For any country, multinational corporations have various effects. In today's global world, MNCs are a very important way of expanding business.

Especially in the Asian economy, a large inflow of foreign companies has taken place. In the case of Philippines, the following observations can be made:

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Positive Effects

• They have led to a drastic rise in the employment opportunities in Philippines. The local economy is not strong enough to generate thousands of jobs, and many people were still dependent on primary activities. With MNCs, this has changed.
• They allow for access to a large amount of funds, which are not available domestically. Due to capital inflow, the problem of scarcity of funds is solved. Rates of return are higher in Asia, than in other continents.
• The end winners are the consumers, who get access to a much larger basket of goods and services. MNCs bring in a huge amount of variety for the consumers. Now consumers have access to everything they need.
• Apart from variety, the quantity and quality of goods and services also increases greatly. The local economy is not powerful enough to support such type of production.
• The economic development of Philippines has greatly been attributed to MNCs, as they also bring with them a lot of new techniques and best practices. It has brought the country at par with developed countries.
• MNCs in Philippines have also allowed for much vibrant market structures, and prevented a few old firms to dominate. It brings a level playing field for all firms.

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Negative Effects:

• Unfortunately, labor is available very cheaply in Asia. This has created the perception that Asian countries can be exploited easily, and this has happened in the case of many countries, including Philippines. The host governments should prevent this from happening.
• It has also been argued that MNCs are so large that they can completely destroy the local firms, and hurt the local economy. While this may not be true, it does create a negative image. Even in Philippines, many small businesses have suffered due to this.
• There are cases where MNCs can also influence the key decisions of the local economy, pertaining to their administration, finances and governance. Certain large countries have also attempted to gain control over smaller countries through this route.
• MNCs by nature are exploitative, and they are accused of invading other countries. They do so to exploit the resources of the other country, and may not be genuinely concerned about the country itself. In many Asian countries, larger MNCs have caused pollution, deforestation, over-mining, harm to the heritage, and so on. These activities need to be checked and prevented.

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Thus, MNCs can aid the economic development, but the local country must be able to protect its own interests.