MNCs & Foreign Investment

• Helps host country economy by

1. transfer of technology.
2. introducing best management practices.
3. help in improving productivity of economy
4. making local people become competitive or
improving the quality of life of people by
generating quality job, high skill job and high
salary package job.
 MNCs & Foreign Investment……
• Provide needed financial resource to unlock
the inherent potential of economy.
• Reduce poverty.
• Increase literacy.
• Reduce social conflict
• Reduce crime
 MNCs & Foreign Investment in Retail
• Organise, unorganized retail sector
• Improve the availability of products
• Will work on less margin because of economy of
scale
• Improve logistic from manufacturer to consumer
and decrease the middle man
• Product will get cheaper due to decrease of middle
man
• Create employment
Threat of Globalization to Domestic Industry

• Induce competition
• Push companies to invest in modern
technology
• Have to develop product of global standard
• Need a lot of financial muscles to compete
with global giant.
• Require to learn foreign culture and language
to do business.
International Monetary Fund (IMF)
• Provide loan to nation that is in fiscal problem. i.e. Nation that
is having too high fiscal deficit so that government is not able to
generate financial resources through borrowings to bridge the
gap between annual income and annual expenditure.
• Then this nation borrow money from IMF.
• E.g. In last decade Greece & Spain.
• IMF gives short term loan for short term purpose.
• IMF doesn’t give loan for any long term purpose such as
Infrastructure development.
• Lenient in lending to countries having liberal economic policy.
 World Bank (WB)
• Gives long term loan to Nation for
Infrastructure development.
• Doesn’t give short term loan or loan required to
come out of fiscal deficit problem.
• Helps poor countries to grasp economic and
trade opportunity by developing infrastructure.
• Lenient in lending to countries having liberal
economic policy.
 Conflict in WTO
 Mostly developing countries and developed countries are
on conflict on following issues:-
• Opening of agriculture market:- poor countries are
agriculture based they apprehend of developed countries
domination.
• Pollution:- Under developed countries blame developed
countries that developed countries want to sell their
modern technology to under developed countries on higher
price on the name of carbon emission. While developed
countries blame under developed countries for high carbon
emission because of less developed technology.
 Conflict in WTO
• Schemes such as PDS- In which nation provide cheaper
(subsidized) food to poor people
• All form of subsidy such as subsidy on petroleum product,
fertilizer, urea etc.
Developed countries prohibit all countries on subsidy. They say
provide coupons to poor as assistance but don’t interfere in
market price by selling at subsidized rate.
• Intellectual Property Right:- is a great point of conflict.
• Patient:- Patient right on pharmaceutical product is real bone of
contention as one party says charging patient price make medicine
costly while other party says if company will not have patient right
then they will not will to spend on R & D in future.
 Regional Trade Blocks
• Because of conflict in WTO world trades of
developing nations are not developing on
desired path and desired pace so they are going
for regional trade agreements.
• Developed nation are also not waiting for
resolution of the impasse in WTO but getting in
regional trade agreement.
• Thus regional trade agreement is becoming a
novel way of growing international trades.
 Regional Trade Blocks………
• Regional trade blocks are helping international
trade to grow by giving subway to WTO
impasse but it is also harming international
trade by going against WTO principle of non
discrimination international trade practice or
impartial trade practice as regional trade
blocks give preference to other members of
trade block.
Trade Related Investment Measures (TRIMs)
• It refers to certain condition or restrictions imposed by a Government in
respect of foreign investment in the country. The TRIM text provides that the
foreign capital would not be discriminated by the member Governments.
Features of TRIMs

• Abolition of restriction imposed on foreign capital

• Offering equal rights to the foreign investor on par with the domestic investor

• No restrictions on any area of investment

• No limitation or ceiling on the quantum of foreign investment

 Trade Related Investment Measures
(TRIMs)............
• Granting of permission of without restrictions to import raw material and
other components

• No force on the foreign investors to use the total products and or materials

• Export of the part of the final product will not be mandatory

• Restriction on repatriation of dividend interest and royalty will be removed

• Phased manufacturing programming will be introduced to increase the

domestic content of manufacturer
 Trade Related Intellectual Property Rights
(TRIPs)
• Intellectual property rights may be defined as “Information
with commercial value”. IPR have been characterised as a
composite of “ideas and creative expression”. Plus “ the public
willingness to bestow the status of property. It includes:-

• Protection of patent

• Copyright
 Trade Related Intellectual Property Rights
(TRIPs)
• Industrial design

• Geographical indication

• Trademarks

• Trade secrets

• Layout design (topographies of integral circuits)