MULTINATIONAL CORPORATIONS #4 - Dominations of MNC's

MULTINATIONAL �CORPORATIONS #4 - Dominations of MNC's
Dominations of MNCs over Indian Economy
Dominance of MNC’s Worldwide
Recent Trends in MNC

1. MULTINATIONAL CORPORATIONS Dominations of MNCs over Indian Economy Dominance of MNC’s Worldwide Recent Trends in MNC Sundar B. N. Assistant Professor #4

2. Dominations of MNCs over Indian Economy At present Multinational Corporations are having a stronghold over the Indian economy. Even during 1970s, i.e. by two decades ago about 53.7 per cent of the total assets of the giant sector were controlled by the MNCs. As per the estimates of the Industrial Licensing Policy Inquiry Committee, in 1966, there were about 112 MNCs operating in India with assets worth Rs . 10 crore or more . Out of these companies, 48 were either foreign branches or Indian subsidiaries of foreign companies. Besides , there were 14 other companies, having heavy loans and equity capital, which were almost controlled by foreign companies. Thus these 62 companies had nearly Rs . 1,370 crore worth of assets which jointly constituted about 54 per cent of the total assets of the giant sector operating in India. 2

3. Dominations of MNCs over Indian Economy D.S . Swamy was of the opinion that a good number of other companies were also under foreign domination and some of these companies were depending heavily on international financial institutions for financial assistance. Thus during the mid-1960s, Western foreign capital mostly dominated the big business of the country and thereby controlled the apex of India’s industrial pyramid . Another important feature of MNCs in India is that they have been raising a major part of investment resources within the boundary of Indian economy. Sudip Choudhury made a study on the source of finance of MNCs during the period 1956 to 1975 by taking sample of 50 largest foreign subsidiaries . 3

4. Dominations of MNCs over Indian Economy The study revealed that out of the total financial resources of these companies only 5.4 per cent were contributed by foreign sources (equity capital and loans) and the remaining 94.6 per cent were contributed by domestic sources. Another study made by John Martinussen revealed that amount of capital issues contributed by foreign participation declined from 61.5 per cent all consent of public limited companies in 1976 to only 29.5 per cent in 1980 . Moreover, about 20 TNCs affiliated Companies also reduced their foreign funding. During the period 1972 to 1983, some of these companies did not obtain any foreign funds. Thus in reality, the MNCs mostly collect their capital from within the country and repatriate a big chunk of their profits to their parent countries. 4

5. Dominance of MNC’s Worldwide The economic dominance of the multinationals is manifested by the fact that the MNCs control between a quarter and a third of all world production and the total sales of their foreign affiliates is about the same as the gross national product of all developing countries excluding oil exporting developing countries. The economic reform ushered in the developing countries, particularly the liberalisation of foreign investment and privatization, might have given a boost to the FDI in these countries . In the case of the DCs , the investment and employment created by the MNCs have been chiefly concentrated in about a dozen of the nations; China, Brazil, Mexico, Hong Kong, the Philippines, Singapore, India, Taiwan, Indonesia and South Korea accounting for a major share. The value added to all foreign affiliates of MNC’s as a percentage of world GDP increased from 5% in the beginning of the 1980s to nearly 10% at the end of the last decade . 5

6. Dominance of MNC’s As the Brandt Commission observes, foreign investment has moved to a limited number of developing countries, mainly those which could offer political stability and the economic clout of the MNCs is indicated by the fact that the GDP of most of the countries is smaller than the value of the annual sales turnover of the multinational giants. In 1997, the value of the sales of the US multinational, General Motors , the biggest multinational in terms of sales turnover , was $ 178. 2 billion. Of the total 101 developing countries with a population of more than one million each, listed by the World Development Report, only nine countries ( India, China, Mexico, Argentina, Indonesia, Turkey, Brazil, Russia and S. Korea) had a GDP which was more than this figure. There were also several developed countries whose value of GDP was less than this. It may be noted that in 1997 India's GDP was only $359. 8 billion MNC’s foreign affiliates now account for 1/10 of world GDP and 1/3 of world exports In 1999 6

7. Dominance of MNC’s Due to the differences in the definition adopted, the estimates of the numbers of MNCs also vary. According to the United Nations' World Investment Report 998, there were more than 53, 000 TNCs , which had more than 4, 50, 000 affiliates, The United States and Europe are the homes for most of the MNCs. T heir shares have, however, been declining because of the growth of MNCs in other regions, Japanese MNCs have made rapid strides in the 1970 s and 1980 s. In 1991, majority of the 10 largest multinationals (in terms of sales) were Japanese. Multinationals from developing countries such as S. Korea and Taiwan have also been making their presence increasingly felt . Of 50 largest economies, 14 were TNC and 36 were countries Sales of foreign affiliates world wide $33 Trillion in 2010 and $3 trillion in 1980 GDP of most of the countries is smaller than some MNC giants annual sales volume 1) In 2021 Wal-Mart stores revenue $559.2bn whereas Norway GDP $ 445.51bn 2) Royal Dutch/Shell group revenue $ 268,690mn whereas South Africa GDP $ 213,100mn 3) General Motors Revenue $ 193,517mn whereas Nigeria GDP $71,318mn 7

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11. Recent Trends in MNC Increasing emphasis on market forces and a growing role for the private sector in nearly all developing countries. Rapidly changing technologies that are transforming the nature of organization and location of international production. The globalization of firms and industries. The rise of services to constitute the largest single sector in the world economy. Regional economic integration, which involves both the worlds largest economies and selected developing countries. 11