MNCs: Impact on Host Societies

As has been discussed earlier, MNCs have the capacity to research, investigate and identify human needs, behaviors and issues. They can go even further in changing the human behavior and life styles. The same corporations can promote research on issues facing the mankind and can come up with multi-dimensional responses including the development of products and services that are needed to address these problems. They have plentiful capital as well as human resources, expertise and capacity needed to change human minds and behavior - and promote the stuff really needed for the betterment of individuals and societies. But are these MNCs doing this or is it right to expect such a contribution from them? This is important to discuss since the process of globalization is claimed to be targeted for the common good of the globe or global village i.e. each and every person living on the earth. This in turn requires determining what are the real human issues and problems particularly those that are being faced by the host societies. The critical question than would be, whether it is in the interest of MNCs to address and take measures to resolve these problems. Let us first have a look at the problems and strengths of the host societies.

The Problems and Strengths of the Host Societies: The host societies where the MNCs operate other than the countries of origin are mainly the developing countries (DCs) and least developed countries (LDCs). There are differences of degree but in general DCs and LDCs have common problems and issues. They have widespread poverty, diseases and pathetic health care systems, illiteracy and lack of education facilities, weak infrastructures, governance issues such as weak and corrupt governments, wrong priorities, lack of access to justice and disparities in income distribution. It may be worthwhile to quote here the Jordanian Queen Rania A1 Abdullah. In a seminar held in India she has so beautifully summarized the situation by saying:

“the greatest challenge we face today is the hope gap that from birth separates people into those who have a future and those who do not. The hope gap opens when our very youngest are denied what they need to strive for - health, nutrition and literate mothers who can pass along values. The hope gap widens when school children lack books, technology and supports, including teachers who have training and access to global communication tools. The hope gap is even there for students who manage to reach the university—”

As to the strengths these are traditional societies, having strong social structures and the family system providing strong bonds of relationship, a caring environment, extended family based social security system, simple living and an inherited conventional knowledge and wisdom. These are mainly agricultural economies; as such food security has not been a problem in ordinary circumstances.

Let us see what happens or is happening particularly in the economic, social and cultural sectors when the MNCs enter into these societies and start acting aggressively to achieve their business and commercial objectives. We would first take the points that help understanding in what “GOOD” the MNCs are creating for the host societies.

The Positive Side

Financial and Technological Resources and Expertise: There is no denying the fact that the MNCs bring in certain advantages to the host societies. Huge resources and investments, technology, innovation and expertise are made available in host societies through these MNCs. A culture of research and development, training in marketing and developing human resources within the organization is also a benefit the host societies get with the presence of MNCs. They also contribute significantly to the exchequer by paying taxes.

Good Business Practices: Good governance, transparency within the organization, delegation of power and performance based evaluation and incentives program encourage the merit approach. The work culture and the professional working environment within the organization is an important characteristic of the MNCs. Well maintained offices with most modem facilities available to all staff members, weather they are working in senior position or in a junior capacity, high salaries, transport and medical care facilities, present a culture which has its own impact even on the local business environment. As the MNCs are trend setters these practices are also followed by the large national corporations and thus result into a chain action. Even the civil society is influenced with this professional work culture. The merit and knowledge based professional performance culture leads to promoting higher management and business education along with other important disciplines in the society.

Comforts of Life: Large scale economies, quality control and a healthy competition on certain occasions lead to price cuts, reductions and other incentives to the end user. People get comforts of life at much cheaper rates and/or at their doorsteps.

Infrastructure Improvement: Many MNCs help in improving the infrastructure and provision of basic needs in their specific areas of operation. They provide funds to the civil society organizations or make direct charity to improve the living and business conditions within and surrounding areas where they are operating. While on many occasions these are voluntary practices, the tax exemption facility provided under the law also helps in encouraging such initiatives.

Infrastructure Improvement: Many MNCs help in improving the infrastructure and provision of basic needs in their specific areas of operation. They provide funds to the civil society organizations or make direct charity to improve the living and within and surrounding areas where they are operating. While on many occasions these are voluntary practices, the tax exemption facility provided under the law also helps in encouraging such initiatives.

Pluralism: Because of MNCs a kind of interaction across boundaries takes place. Even the education (particularly business) has to take into account the global perspectives. This global perspective and cross-cultural understanding increases the adaptability of the students to any place around the world. This leads to the mixing of cultures and practices and encourages pluralism as well as competition. Integration and the spread of ideas and images preempt reactions and resistance. Out-sourcing by MNCs particularly in the services sectors is relatively a new but important phenomenon. The recipient countries are thus becoming not just the workshop of the world but the back office too. Besides providing employment this is also promoting pluralism. These can be great assets for the societies if taken and addressed positively.

Khalid Rahman

Source: Essays on Muslims and the Challenges of Globalisation, Institute of Policy Studies, Islamabad. Republished with permission.