Principle of comparative advantage: “Two countries can both gain from trade if, in the absence of trade, they have different relative costs for producing the same goods” ( David Ricardo) Transnational corporation: “corporations which operate in more than one country or nation at a time and have become some of the most powerful economic and political entities in the world today.” | Topic: Transnational Corporation Group: Nguyen Vu Hong Minh BAIU08019 Tran Thi Lan Phuong BAIU08065 Principle of comparative advantage: “Two countries can both gain from trade if, in the absence of trade, they have different relative costs for producing the same goods” ( David Ricardo) Transnational corporation: “corporations which operate in more than one country or nation at a time and have become some of the most powerful economic and political entities in the world today.” In 1970, TNCs In 2008: TNCs, more than foreign affiliates( UNCTAD) Total sales of TNCs ~ $ 31 trillions The value added ( Gross product) of foreign affiliates worldwide ~ 11% of global GDP in 2007 The number of employees rose to some 82 million 85 % TNCs in the Triad (European Union, Japan and the United States), only 5% in developing countries: Six industries dominated: motor vehicles, pharmaceuticals, telecommunications, utilities, petroleum, electrical/electronic equipment Top 100 TNCs account for 11 percent foreign assets, 16 percent of total sales, 12 percent of total employment. “the productive core of the globalizing world economy.” Foreign direct investment (FDI) : at least 75% of world flows come from TNCs International trade: 67% of all exports are directly related to TNCs through intrafirm operations or trade with third parties Evolution by region and country : In 1993, EU=37, US=32, Japan=21, others = 10 In 2003: EU, more than 50% ; and the increase of some developing countries. Shifts across sectors: from the primary sector and resource-based manufacturing to services and technology-intensive manufacturing Note: In 1993, three industries (electronics & computers, motor vehicles, and petroleum & mining) ~ 50 % In 2003, they ~ 30%, all service ~ 25% investment and increased export income introduce unavailable goods and services that are essential for diversifying production increase productivity of labor stimulate local entrepreneurship opportunity for technology transfer, leads to new domestic industries tax revenue for host government economies of scale, exports more profitable and competitive, increases national income introduce inappropriate products, technology, and consumption patterns labor-saving technology increases unemployment Increase gap between rich and poor population require the subsidiary to purchase inputs from the parent company hire the most talented entrepreneurs limit the transfer of patents, industrial secrets, and other technical knowledge to local subsidiary Investing in few industries. In 2010, FDI- 25% GDP Key economic and provinces: in the South( Ho Chi Minh, Ba Ria- Vung Tau, Dong Nai, Binh Duong, in the North( Ha Noi, Hai Duong, Vinh Phuc, Hai Phong, Quang Ninh) STRENGHS WEAKNEESES Relative economic growth Increased investment and industry Good social index Stable political regime, Cheap labor, natural resource Strong domestic demand Investment Law Disappointed result in FDI Insufficient investment in industry, poor in infrastructure, transportation, education. Economic Uncertainty Attach special importance to oriented development OPPORTUNITIES THREATS FDI is too much in the world Global financial WIPS Evaluation Foreign Investment agency International Monetary Fund United Nations Conference on Trade and Development
