Many Multi National Corporation (MNC) are relocating their plants into developing country. This is a form of foreign direct investment (FDI) to the developing country. These MNC benefits from the lower labour costs and also grants given by the government of these developing countries in order to attract these MNC. Lower tax rates or tax exemption are also given for a period of time. By all this, the MNC gain competitiveness in their products and therefore been able to gain a great market share. These developing country also gain from the investment made by these MNC in them. Infrastructure are being improved or build up. More job opportunities made and the lower unemployment rate relieves the government burden. Standard of living of the people in these developing country should increase as they have a variety of choices. The country will also benefit from higher GDP (gross domestic product) as products are produced in their country and export outside.
The problem is this. Most of these MNC are exploiting the developing nations. Labours are paid a low wage rate as there are little or no trade union or body to govern their rights or negotiate with the MNC. The labour who complains about their low pay will be easily sent off by the MNC as the high unemployment rate provides many substitute. There are many that are willing to work for money, even if the pay is low.
Working conditions of the workplace are not safe too. In these developing countries there are no strict enforcement of workplace safety regulations, which enables the MNC to cut their costs.
As the MNC employs a high propotion of the labour in the country, the move of the government to pass workplace regulation laws or minimum wage regulations might lead to the MNC relocating their plants to other developing countries which don't have such law. The government will have to back off to the threats of these MNC to relocate their plants which will leave the people in the country unemploy. The MNC decision is so great as it can easily effect these countries GDP or economy. Moreover, some MNC will relocate to other countries when the tax exemption period given by the country expires. Then at other country the MNC will enjoy a new tax exemption again.
Can the FDI of these MNC in developing countries be justify ? With the problems of low wages, child labour, harsh working condition, depletion of natural resources..