Policies towards transnational corporations

Multinational Corporation have become a very important factor, in the development of global economy. In 1999 the MNC's generated 25% of the worlds GDP (UNCTAD estimates). Therefore, their impact on particular countries economies is a big issue. Some say, that the MNC's highly contributed to the economical growth of states or that they boosted technological improvements in developing countries.
Others claim that the MNC's are creating "race to the bottom" around the globe, and that they provide profits only for the local elites. Taking that into concideration, governments should ask themselves a question of what policies should be aplied to this transnational companies.

Advocates of MNC's claim, that the best policy for the host countries is total liberalisation and opening their econimies. According to them, the regulation attempts would provide less foreign direct invetments (FDI's) and that would lead to the decrease in GDP growth. They also say that countries should compeete with each other, by providing more economical "privileges", in order to attract foreign investors. By that they mean tax reductions and, in some cases, labour standards decrease. All that to get more FDI's.

Opposers of the total liberalisation claim that the regulation and control of the FDI's does not necessarily lower their level. They give examples of Southern Asia countries, who actually increased the control, and still atracted more foreign investors. It turns out that it is the education, the infrastructure or other public services that the country offers, which really brings the investments to the country. What is also proven, the lack of regulation and to many privileges lead to increase of the inequality of profit distribution.

I reckon that in general terms, a certain degree of liberalism is highly required to provide the FDI's. Some regulations, however, shall remain in order to fit the invesments within the countries overall development strategy. A "healthy" balance between these two policies would be most positive for the societies, that could benefit more from the FSI's and for the MNC's, because whey would be able to operate in well prepared countries.