Negative effects of MNCs on host countries

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  • Negative impacts of MNCs on overseas countries.
    • Employment
      • Wages can be low and working conditions poor. Sweatshops are sometimes found.
      • Health and Safety conditions are often poor and regulations may be ignored.
      • Child labour may be used and exploited.
    • Skills & technology transfer
      • MNCs may not train local workers to a high level.
      • Skills may be brought in by hiring expat workers; locals may only get the unskilled jobs.
      • Managers are often not recruited locally.
      • R&D facilities may be kept in the home country, reducing opportunitiesto develop skills or technology transfer.
      • Many MNCs enter another country simply to access a new market, so only sales & marketing facilities are estsablished.
    • Effects on the local community
      • Local businesses suffer at the hands of the MNCs that reduce their market share.
      • They mass-produce standardised products, threatening national product variety.
      • They act as agents for cultural imperialism, which replaces & even destroys that native culture with unwanted products & values.
      • MNCs cause great damage to the environment by their processes & the transportationof their products. This damage can be short or long term & the resulting situation may be unsustainable
    • Effects on the wider economy
      • Profits can be repatriated to the home country
      • Taxation can be reduced or avoided by transfer pricing
      • MNCs are likely to take whatever incentives are on offer, stay for a while & then move to the newest low cost location in another country, leaving behind unemployed workers and a weakened economy
      • They encourage a so-called 'race to the bottom'

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