BDU

Globalization Assignment
[Type the document subtitle]
Sphelele Nzimande 0100093 1/5/2011

Contents

Page

1. Introduction2

Perspective of multinational corporations operating in different parts of the world...3

3. Globalization from the perspective of many national governments with regards to their economic stability and or growth..5

4. Globalization from the perspective of the trade unionists..7

5. Civic Society Activists..10

6 Bibliography.12

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INTRODUCTION
Globalization is the process by which the economies of countries around the world have become increasingly intergrated over time. This intergration occurs as technological advances expedite the trade of goods and services, the flow of capital, and the migration of people across international borders. The term has been used in this context since the 1980s when computer technology first began making it easier and faster to conduct business internationally. Globalization also refers to the efforts of businesses to expand their operations to new countries and markets. According to a cover story in Business Week, globalization "has created millions of jobs from Malaysia to Mexico and produced a lot of affordable goods for Western consumers. It has brought phone service to some 300 million households in developing nations and a transfer of nearly $2 trillion from rich countries to poor through equity, bond investments and commercial loans. It's helped topple dictators by making information available in once sheltered countries. And now the Internet is poised to narrow the gulf that separates rich nations from poor nations even further in the decade to come." Without a doubt, globalization has had a number of positive effects on nations and businesses around the world.

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1. Perspective of multinational corporations operating in different parts of the world.

A multinational enterprise is a firm that has productive capacity in a number of countries. The profit and income flows that they generate are part of the foreign capital flows moving between countries. As countries adopt more open outward oriented approaches to economic growth and development the role of multinational enterprises (MNE) or transnational corporations become more important. As local markets throughout the world are being deregulated and liberalized foreign firms are looking to locate part of the production process in other countries where there are cost advantages. These might be cheaper sources of labour, raw materials and components or have preferential government regulation. Although developing countries may present high levels of risk they also present the potential for higher levels of profit. Many developing countries with growing economies and increasing incomes may provide future growth markets.

The Benefits of Multinational Corporations:

A MNE investing in an area may result in a significant injection into the local economy. This may provide jobs directly or through the growth of local ancillary businesses such as banks and insurance. It might initiate a multiplier process generating more income as newly employed workers spend their wages on consumption.

MNEs may provide training and education for employees, this creates a higher skilled labour force. These skills may be transfered to other areas of the host country. Often management and entrepreneurial skills learned from MNEs are an important source of human capital.

MNEs will contribute tax revenue to the government and other revenues if they purchase existing national assets as in the case in most Developing countries through the privatization process.

The Problems of Multinational Enterprises:

The MNE may employ largely expatriate managers ensuring that incomes generated are maintained within a relatively small group of people. The attraction for the MNE may be the large

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supply of cheap manual labour who they can employ at low wages. This may contribute to a widening of the income distribution. It will also not lead to the transfer of management skills.

MNE investment in developing countries often involves the use of capital intensive production methods. Given that many developing countries have potentially large cheap labour forces and have high level of unemployment, this might be considered inappropriate technology. More labour intensive production methods might be a more appropriate option for alleviating poverty and aiding development. Any resulting growth might be considered anti-developmental.

MNEs engage in transfer pricing where they shift production between countries so as to benefit from lower tax arrangements in certain countries. By doing this they can minimize their tax burden and the tax revenue of national governments.

As many MNEs are very large and have considerable power they can exert influence on governments to gain preferential tax concessions and subsidies and grants.

However economists maintain that the cycles of poverty will not be broken from within the domestic economy. The level of investment needed to raise productivity and incomes is not possible. Thus foreign direct investment through the MNE activity is essential. By investing in areas and utilizing the factors of production where the developing countries have an absolute and comparative advantage MNEs will lead to a more efficient allocation of the worlds resources. However if this leads to specialization and dependence in certain sectors of the economy then the host country will be vulnerable especially if the MNE decides for commercial reasons to leave the country in the future. Many development economists are concerned with role of the MNEs in low income countries and identify a number of problems associated with foreign direct investment. Equally other economists and politicians argue that MNE activity can drive growth and development. The true answer is that probably the arguments put by both sides are applicable in certain countries with certain MNEs at certain times. Yet the concept once regarded as almost universally positive has undergone a bit of a re assessment in recent years. Wide spread protests against the World Trade Organization (WTO) and consumer boycotts arising from the practices of multinational corporations in developing countries have raised public awareness of the hazards of globalization. "The plain truth is that market liberalization by itself does not lift all boats, and in some cases, it has caused severe damage to poor nations," (Business Week)

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2. Globalization from the perspective of many national governments with regards to their economic stability and or growth.
In the colonial period, many African leaders exerted dictatorial control over their societies. Through their undemocratic policies, they had spread dissatisfaction among the people, which has manifested over time. These political tensions, in turn, have generated fierce conflicts over resource control. One major positive impact of globalization on Africa is that it has made available information on how other countries are governed and the freedoms and rights their people enjoy. It has also opened African countries to intense external scrutiny and exercised pressure for greater transparency and accountability in Africa. However, most of the forces unleashed by globalization have had a negative impact on the growth and consolidation of democratic governance in Africa. Among these are the following: While calling for greater accountability and responsiveness of leaders to their people globalization has often pressured African leaders to adopt policies and measures that are opposite to the feelings and sentiments of the vast majority of their people. A good recent example of this is the pressure on many African governments to take certain measures in the fight against terrorism from external powers. By imposing economic specialization based on the needs and interests of external forces and transforming the economies of African countries into a series of economies linked to the outside but with very little linkages among them, divisions within African countries are accentuated and the emergence of national consciousness and the sense of a common destiny is frustrated. Democracy with its emphasis on tolerance and compromise can hardly thrive in such an environment. The economic specialization imposed on African countries makes rapid and sustainable growth and development impossible, conflicts over the distribution of the limited gains realized from globalization become more acute and politicized. Vulnerable groups, such as women, the youth, and rural inhabitants, fare very badly in this contest and are discriminated against. This further erodes the national ethos of solidarity and reciprocity that are essential to successful democracies.
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By insisting on African countries opening their economies to foreign goods and entrepreneurs, limits the ability of African governments to take proactive and conscious measures to facilitate the emergence of an indigenous entrepreneurial class. Consequently, due to their weakness and incapacity to operate on a national basis, rather than being forces for national integration and consolidation as was and is the case of European and American entrepreneurs, African entrepreneurs reinforce social divisions based on ethnicity, religion, race, language, culture, and location.

Rather than being an asset for the development and consolidation of effective and democratic governance in Africa, globalization is more of a liability. This does not however mean that Africans are helpless in the face of these obstacles. There are many things they can do to rectify the situation and enhance the prospects of creating and consolidating effective democratic governance in Africa.

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3. Globalization from a small producer of electronics goods Electronic goods sector is a major booming sector in India not only as an intermediate commodity but more as a consumer product this sector has undergone a rapid growth and development since ushering in of liberalization in India from cassette to DVDs, from black and white TVs to LCDs, from analogue terrestrial cables to DTH services and from landline phone to mobile internet. Indian Consumer Electronic Goods Sector is facing a lot of competition from abroad, especially from South Korea and Japan, whose success story is based on the export promotion techniques in this sector. From a small capital based firm the companies like LG and Samsung have become popular MNCs. The biggest attraction for MNCs is the growing Indian middle class. This market is characterized with low penetration levels. MNCs hold an edge over their Indian counterparts in terms of superior technology combined with a steady flow of capital while domestic companies compete on the basis of their well acknowledged brands, an extensive distribution network and an insight in local market conditions. Thus, its now a trend that while rural population has greater access to goods from Indian manufactures, urban population is showing preference to the MNCs brands. Prior to the economic reforms, electronic goods sector was not much developed in India. MRTP Act was also not active enough to promote full grown competition in this sector. The New Trade Competition Commission of Indian Policy Regime of 1991 promoted trade liberalization which allowed foreign companies to settle in India and have their manufacturing plants. Various laws and acts have been passed since then to enhance competition in electronic goods sector.

Free Trade Agreement WTO regime which came in force in 2005, results in zero customs duty on imports of all telecom equipments. 217 IT/electronic items were covered under the Information Technology Agreement (ITA) of the WTO for complete customs tariff elimination by 2005. Out of these 217 items, several items were already at NIL customs duty. In fact, IT/electronics was the first sector in India to face complete customs tariff elimination. The ITA-1 would result in intensifying competition as more imported products will be easily available at lower prices.
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Foreign Investment Policy: FDI Foreign investment up to 100 per cent is allowed in Indian electronics industry set up exclusively for exports. The units set up under these programs are bonded factories eligible to import free of duty, their entire requirements of capital goods, raw materials and components, spares and consumables, office equipment etc. Deemed export benefits are available to suppliers of these goods from the Domestic Tariff Area (DTA). A part of the production from such units is permitted to be sold in the DTA depending upon the level of the value addition achieved. The FDI approval for electrical equipment (including computer software and electronics) from January 1991 to March 2004 was US$ 7.29 billion, which was 9.94 per cent of the total foreign direct investment (FDI) approved. During the same period the FDI inflow for electrical equipment including computer software and electronics was US$ 3.32 billion (Business Journal).

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4. Globilization from the perspective of the trade unionists Trade unions face a difficult situation in assisting their constituents in the face of the new demands being placed on them by globalization. Not only do they face the need to become more representative and better able to provide services to their members by recruiting new members from a broader cross section of the business and industrial community like unions. They confront very different situations from one country to another and differ in their capacities to fulfill their functions effectively. This representation role will remain significant. But "the ultimate credibility of employers' organizations will depend on the provision of quality services to enterprises and their capacity and skill in negotiating on behalf of employers" (de Silva 1996:3). In this regard considerable emphasis is now being given within the region to developing employer organizations as strong professional organizations. Priority is being given to strategic planning developing direct services to members across a range of issues e.g. labour law, IR/HRM, labour market information, human resource development etc. Providing the necessary internal capacities to deliver these services which requires knowledgeable, well trained technical staff, supported by sophisticated research and information bases. More specifically in the area of HRM, employers' organizations need to have a role which is proactive and preventive. Primarily concerned with promoting among the trade union members the need for sound workplace relations which emphasise the importance of improved cooperation and consultation and effective negotiation to address workplace Therefore trade unions should also encourage more broadly based unionism that is productivity conscious and both promote and provide opportunities formal and informal, for workers to be engaged in decision making directly or on a representative basis at a number of levels like enterprise, industrial and national. Governments can also support trade union strategies to encourage democratic governance, awareness raising on key policy issues and training for union representatives on organizational and technical issues.

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5. Civic society activists

Globalization poses four major challenges that will have to be addressed by governments, civil society, and other policy actors. One is to ensure that the benefits of globalization extend to all countries. That will certainly not happen automatically. The second is to deal with the fear that globalization leads to instability, which is particularly marked in the developing world. The third challenge is to address the very real fear in the industrial world that increased global competition will lead inexorably to a race to the bottom in wages, labor rights, employment practices, and the environment. And finally, globalization and all of the complicated problems related to it must not be used as excuses to avoid searching for new ways to cooperate in the overall interest of countries and people. Several implications for civil society stem from the challenges of globalization. Civil society organizations concerned with development have traditionally focused on aid and resource transfers. They now are going to have to broaden their agenda to deal with the much more complex issues of trade and investment, international financial flows, environment, and migration, among others. Civil society organizations in the old industrial countries also will have to deal with the backlash against globalization, which is producing a growing unwillingness to support multilateral co operation Governments are going to have to decide what they mean by civil society and to identify new ways of dealing with its organizations. At the Overseas Development Council civil society is defined broadly to encompass not only development and advocacy groups, but also corporations, financial institutions, think tanks, foundations, and a range of other groups that are not part of government. But governments and other actors need to decide whether civil society is simply an effective and even cheap way of delivering social programs or whether it is good in and an essential component of a democratic society. In other words, they are going to have to be much more precise about the purposes of working with civil society groups and about how they fund them. Then, there is a whole set of critical questions for the multilateral institutions, particularly concerning participation and transparency. These issues are extremely difficult because these remain governmental institutions, and governments often do not welcome the participation of civil society in decisions. Finally there is a need for high level political discussions among Name: S.Nzimande Student no.0100093 Page 11

leaders from the old industrial countries through to the emerging economies and the countries that risk marginalization by globalization.

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Bibliography
1. www.imf.org

2. .www.cci.in

3. Globalisation India's Adjustment by Biplab Dasgupta

4. Globalisation, Poverty and Inequality by Richard Kohl

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