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What are the pressures that encourage MNEs to establish in newly industrialising countries

Home, - How can MNEs act ethically in host countries

Question - a. What are the pressures that encourage MNEs to establish in newly industrialising countries?

Answer -

There are many pressures which force the MNEs to establish their branches in newly industrialising countries or developing countries due to the following reasons:

1. Such country is abundant in labour resource and therefore it can hire labour resource very easily without making additional efforts to search for them.

2. Due to labour abundancy, MNEs will be able to hire labours or workers at a comparatively lower wage rate and thus bale to reduce the cost of production.

3. In newly industrialising countries or developing countries, MNEs can get land at a subsidized rates as well as tax rebates on establishing new entities. Such benefits attract MNE to establish their branches in such countries.

4. MNEs get additional benefits while establishing their branches in newly industrialising countries or developing countries like subsidies, concessions, natural resources and emerging markets. Such countries have great potential in terms of growth and profitability.

b. What are the pressures that encourage politicians in newly industrialising countries to allow MNEs to establish in their countries?

Answer -

There are various pressures due to which politicians allow the establishment of MNEs in newly industrialising countries like:

1. Such companies will bring advanced technology for their production purpose. The government can make imports of such technology or can produce them in-house to make the business environment more competitive.

2. Such companies will provide adequate employment opportunities to the people and thus help in eradicating the problem of poverty and starvation.

3. The establishment of such companies will make the local industry more competitive as they will try to produce the products at a comparatively lower rate by increasing efficiency and automating the business operations to a large extent.

4. Such companies will help the government in increasing the tax revenue and therefore more expenditure can be made for the welfare of general society.

c. How can MNEs act ethically in host countries?

Answer -

MNEs can act ethically in host countries by providing god quality products to the general society at a comparatively affordable rate, non-exploiting the natural resources of the economy, providing adequate employment opportunities to the local community and make local industry more efficient by bring modern and advances technology. It should conduct welfare programs for the general society at regular intervals as part of Corporate Social Responsibility. Hence, they should return atleast what they receive from the said economy.


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