Jed Adrian A.

Cuaton The Contemporary World (GEC103)

Neil Ian Bonifacio I – BSCE/ MTH 2:30 – 4:00
Rachel Anne Bombeo Instructor: Jayboy M. Sartorio
Jillian Dela Torre

Global Corporations Being More Powerful Than The Government Under Globalization:
Positive and Negative Impacts of Investment From Global Corporations and Potential
Solutions to the Issue it Poses

Globalization today has become more and more dominant over governments all over the
world. The international political and economic systems functioning in these countries also
played a key role in the internationalization of global corporations and free markets. In some
countries, global corporations have become crucial in the development of their respective
economies. Furthermore, there are both positive and negative implications for these global
corporations that are allowed to operate with fewer regulations. Those will be discussed in this
paper along with the solutions that are suggested to solve the negative implications inducted by
this issue.

Global corporations have paved the way for the globalization of economies throughout
the world. Their contributions to these economies have provided positive opportunities for
people and governments of those areas to develop. Foreign Direct Investment in particular has
produced millions of jobs in countries like Singapore, Malaysia, China, and Japan. In Singapore,
for instance, the rate of Foreign Direct Investment has increased since 2009 and it eventually led
to a minor increase and stability of employment rate and employment generation of the country.

Figure 1: Singapore’s Foreign Direct Investment: Total From 2009 to 2020

The employment rate in Singapore has also increased and become stable as a result of
foreign direct investment input flowing to the city-state. Since 2009, employment rate of
Singapore has become stable. It is considered as a positive result of the increase in foreign direct
investment in the country. Because in Singapore laborers and employees may not have
permanent jobs because of termination of contract agreement between corporation employers
and their employees, the increasing foreign direct investment input is extremely helpful in
providing Singaporeans additional employment opportunities once the employees got out of their
jobs.

Figure 2: Singapore’s Foreign Direct Investment: Total From 2009 to 2020

Despite all the positive impacts of direct investments instigated by global corporations,
there are also some negative implications to it, especially on allowing global corporations
dominate power over respective national governments. In the Democratic Republic of Congo,
their cobalt mines, operating within their country and also in their neighboring countries, have
produced negative implications on the political, social, environmental, and economic aspects of
their country. Most, if not, all of these mining companies including those who extract diamonds
and other precious metals and minerals from their country often control the government and its
officials trough bribery and extortion.

Figure 3: Cobalt Production in Democratic Republic of the Congo from 2005 to 2016

It is undeniable that the Cobal mining industry in the Democratic Republic of Congo
contributes a huge portion of their economy as they are the world’s largest Cobal supplier.
“Compared to other metals, international attention on cobalt has increased substantially over the
last few months. This is due to expectations by market participants following increasing global
demand and a relatively tense market situation for cobalt where most of the production originates
from the Democratic Republic of the Congo (DRC). Cobalt represents an important metal used
in the fabrication of batteries, super alloys, carbides, dye, sand magnets. From 2010 to 2015
global cobalt demand increased from 65,000 tons to more than 90,000 tons per year. Over the
same period the mean compound annual growth rate for cobalt demand was 7.5 % while the
demand for cobalt-based chemicals increased at an even steeper rate of 10.6 % (CRU 2016). The
CRU commodity consulting agency forecasts a rise in global cobalt demand up to 155,000 tons
by 2025. The study“Commodities for Future Technologies”, recently commissioned by the
Federal Institute for Geo-sciences and Natural Resources (BGR), points out that even when only
considering the emerging technologies market (and especially lithium-ion batteries used in
electric cars), annual cobalt metal demand should rise to 122,000 tons by 2035" (Marscheider-
Weide, Mann et al. as cited by Al Barazi, 2016).

On the contrary, the efforts of the government of Democratic Republic of Congo to

regulate these international mining companies have proven politically disastrous. In fact, some of
these companies have private armies with them which produced multiple armed conflicts against
the government’s forces and inflicted serious violent casualties towards non-combatants and
workers. Illegal mining has also impacted political stability as huge mining companies also
indulged in illegal mining operations over the country. This is also aside from some thousands of
informal miners who are also operating illegally in the country. There are also many reports of
miners and mining workers being abused psychologically and physically by the Chinese-owned
Cobalt mining companies. The Congolese Government cannot totally control and regulate these
companies as they also wield great political power in bribing, influencing, and performing
extortion to local and national politicians in the country. This makes it difficult for the
government to impose regulations and its mining industrial policies.

“Workers at Chinese-owned mines have been subjected to discrimination, says the report.
At Sicomines, Somidez, TFM, and their respective subcontractors, as well as at Metalkol’s
subcontractors, workers reported either experiencing or witnessing racism and discrimination
almost daily, expressed through physical violence and verbal abuse. ‘Workers described a
‘colonial era’ level of discrimination – being kicked, slapped, beaten with sticks, insulted,
shouted at, or sometimes pulled around by their ear, when they were not able to understand
instructions in Mandarin, made errors or refused to undertake dangerous tasks. In most cases,
those who countered this treatment were immediately dismissed without pay,’ says the report”
(Thomas, 2021).

In Singapore, they have governmental laws and regulations which protect both the
interest and welfare of the laborers and the investors. The compromise made to secure the two
has paved the way for economic stability and development of the country. Singapore has their
Termination of Contract Law, which provides legislative and public guidelines and regulations in
terminating the employees contract. When necessary, the government provides intervention to
global corporations operating whiting their country if those corporations operate and perform
business processes beyond the government standards or when they violate legislative and
governmental regulations. This strict investment and market system in Singapore reduced the
chance of labor exploitation in the country while increasing their grasp on foreign capital to fund
their public programs and social welfare systems like housing at the same time
 Besides that, Singapore also has market-competition regulations and guidelines that must
be followed in order to provide equal competition opportunities for all private enterprises
operating within the country and to prevent the negative impacts such as violent conflicts
between competing entities in the free-market. “All Singapore companies in the course of their
activity must follow market-based competition regulations. This branch of law promotes and
seeks to maintain market competition by regulating anti-competitive conduct by any business. A
competitive market results in open, dynamic markets, featuring increased productivity,
innovation, and better value for consumers. Competition law is known also as ‘antitrust law’ or
‘anti-monopoly law.’ The basic statute that regulates this field in Singapore is the Competition
Act” (“Business Laws Every Singapore Company Should Be Aware Of,” 2019).

Singapore is also a pure example that it is possible for the government to control huge
global corporations operating within their country despite the fact that these global corporations
economically dominate international markets and can wield greater political power because of
their respective economic powers. Before, Singapore also faced problems as to how they can
control the continuous inflows of Foreign Direct Investment in their country. In fact, in the 1950s
to 1960s, it was an unconventional idea for countries to allow Foreign Direct Investment to get
into their countries. As what Dr. Kishore Mahbubani, Ph.D., author, former diplomat, and Dean
of Lee Kuan Yew School of Public Policy, said that allowing Foreign Direct Investment to enter
your country is like allowing yourself to be raped. So Singapore did all the necessary and
pragmatic governmental regulations and business laws to prevent its country from being “raped.”

Also in Singapore, their country has necessary security measures imposed through
financial regulations to prevent terrorism being funded through the financial institutions
operating within their country. This allows the country to be free from liability and free from
terrorism of all sorts through funding the armed groups as their Monetary Authority is very strict
in implementing its guidelines and following the rule of law in regulating financial institutions.
Thus, this ensures that financial institutions in Singapore will not posses far mor egreater
financial power over the government. “The Monetary Authority of Singapore (MAS) imposes
financial sanctions and restrictions on financial institutions and variable capital companies
(VCCs) through MAS regulations issued under section 27A of the Monetary Authority of
Singapore Act (Cap. 186) and section 83 of the Variable Capital Companies Act 2018. The MAS
also imposes targeted financial sanctions provided for under the Terrorism (Suppression of
Financing) Act (Cap. 325)” (Chye et. al., 2020).

On the other hand, at the Democratic Republic of Congo, the country has imposed
regulations and restrictions on mining. As stated by Schoutheete et al. (2021), minerals
underground are owned solely by the Democratic Republic of Congo. Any private party,
however, may be permitted by the country to undertake in mining operations (from exploration
to exploitation and distribution), on the condition that specific targets of eligibility, priority and
capacity criteria are met as described in the Mining Code. The mining permits or licenses
available in the Democratic Republic of Congo are research permits, extraction permits (this
includes small-scale mines) and tailing exploitation permits. There are also legislations
specifically imposed for artisanal mining and quarry rights.
 Despite these legislations and regulations imposed by the Democratic Republic of Congo,
it turns out that the mining companies operating within the country strongly oppose the mining
regulations imposed by the government. In 2018, the country imposed a new mining law despite
opposition from many mining companies. It is an indication of the country’s efforts to solve
environmental and economic exploitation of the country. As reported by BBC News on March
10, 2018, Joseph Kabila, President of the Democratic Republic of Congo, signed a new mining
code into law. Dr Congo is Africa’s biggest producer of copper and cobalt, a vital component in
mobile phone batteries and other digital gadgets. Foreign mining corporations operating in the
country strongly protested against the law, expressing their operations in the country would no
longer be profitable if the new law was imposed. Several owners and chief executives of these
mining companies flew to the capital Kinshasa this week in hoping to convince President Kabila
to change his mind. Their primary argument is that the legislation would prevent the flow of
future investment to the country and will disregard existing concessions and agreements.

Global corporations created huge impact throughout the world by being the means for the
globalization of the entire world. Without them globalization process would have not been made
possible. Their drive for profit and greater market opportunities opened many economic and
political opportunities, including global interconnectedness. However, it should also be taken
into account the negative impacts of some global corporations on the environment, politics, and
economy of some countries of the world, especially in Africa. Some of these global corporations
have become so much powerful over the government that they control a country’s politics
through coercion, bribery, or extortion to the point where they will be able to maneuver politics
for the advancement of their own goals and interests.

A highly potential solution to this issue is to employ a governance or political system

which promotes political accountability, political transparency, and political efficacy in handling
all the country’s political, social, environmental, and economic affairs. The parliamentary form
of government is the best type of political system that has the capability to bring these positive
political attributes into action and consideration. Economically speaking, parliamentary systems
are far more superior to the presidential system, which is the system frequently used by most
third world countries like in Africa and Latin America. Parliamentary systems where legislative
and executive branches are merged can easily and rapidly create more environmental and
business regulatory laws to protect the environment, avoid business exploitation, and labor abuse.
It also helps in controlling inflation while maintaining economic growth of nations. “Our recent
work shows that parliamentary systems also produce superior economic outcomes. By using data
from 119 countries across the period 1950 to 2015 and examining an extensive set of
macroeconomic data, we find that parliamentary regimes are consistently better for a country’s
economy. On average, annual output growth is up to 1.2 percentage points higher, inflation is
less volatile and 6 percentage points lower, and income inequality is up to 20% lower in
countries governed by parliamentary systems” (Ozkan & McManus, 2019).

Parliamentary system also offers good representation in the government for different
political parties with their respective political ideologies. As a result of this, the effective number
of political parties (ENPP) is increasing and are becoming politically relevant and influential.
They help the economy by brining positive outlook for investors and provide them political
stability for their further investments. Political stability and good governmental representation
are also keys for positive investment output. It goes along with good legal regulation of global
corporations and imposition of restrictions. “The representation of different societal groups in
parliamentary politics also improved, albeit through invoking “negative identities,” primarily as
a result of the increased competition between the major parties in the 2000s (Kajsiu, 2010: 247).
As the electoral results in the subsequent years imply, this enhanced representation led to
political processes that were much more predictable than before. Over the years, both ENPP
(Effective Number of Political Parties) and FDI (Foreign Direct Investment) have been
increasing, which enhanced the perception of policy stability for potential investors” (Bellinger
& Son, 2019).

In conclusion, it is assessed that the solution to the problems imposed by strong global
corporations being more powerful than the government is to frame the governance system itself
to become more powerful over global corporations. Through this, it will become possible to
produce political stability necessary to solve the economic problems posed by predatory global
corporations and their impacts on the environment and society. System shapes behavior, and so
to make the political, social, and economic systems more strong and less fragile from external
threats and problems posed by foreign investment, we have to adopt to new ways of structurally
making these systems stronger. Globalization has its positive and negative impacts. These
negative impacts form issues, such as the one framed in this paper. Only through pragmatic
solutions it is possible to create sustainable policies and programs geared towards development.
And so, this paper presents that different systems face either economic positivity or negativity.
Only through stable and efficient system, like the parliamentary system, it is possible to solve the
issue of global corporations being more powerful than the government.

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