Question

Outline some of the impacts of multinational corporations on their host state.

Answer 1

Multinational corporations are those companies that have facilities in at least one country other than their host country. They have offices and business conduct in different countries, and they have a host state where they co-ordinate all and manage their operations at a global level.

Multinational corporations impact positively as well as negatively on the host States.

Multinational companies provide many benefits to the host countries, which include a contribution to the GDP growth by spending with local suppliers and through capital investment.

Multinational corporations also provide significant employment and training to the workforce in the host state.

Multinational companies also transfer the skills and expertise, which helps develop the quality of the workforce in the host state.

Those multinational companies, which are vast and profitable, act as a source of tax revenues for the host state's economy.

Furthermore, multinational companies also extend business and consumer choice in the host state. The domestic firms in the host state also see competition from multinational corporations as an incentive to improve their competitiveness, which also raises the efficiency and quality.

Besides these benefits, multinational companies also have drawbacks for their host countries.

The profits multinational corporations are remitted back to the base country of the multinational corporation conduct and are not get invested in the host economy.

There are chances that domestic businesses in the host country may fail to compete with the multinational corporations and shutdown.

Furthermore, multinational corporations are often get accused of imposing their culture on the host state. They also use tax avoidance measures such as transfer pricing to reduce the profits on which they would have to protect the government in the host country.