In the modern dynamic world the stable economy is one of the main indicators of the progress. Indeed, every state of
its own development strategy always chooses an economic stability as a priority
and exerts much effort to contribute to
the development of the world economy. Still, it should
not be forgotten that in addition to countries a huge role in the continued
development of the world economy is
given to transnational corporations. According to
researchers, transnational corporations account for 70%
of world trade, and in the top-hundred
most powerful economies in the world
transnational corporations takes 52 places, and the rest
-countries. What is the
transnational corporation? What are these giants of
world trade, and what would be to
the world economy if there was not such phenomenon as
transnational corporation?
A transnational,
or multinational, corporation has its headquarters in one country and operates
wholly or partially owned subsidiaries in one or more other countries. The
subsidiaries report to the central headquarters. The growth in the number and
size of transnational corporations since the 1950s has generated controversy
because of their economic and political power and the mobility and complexity
of their operations. Some critics argue that transnational corporations exhibit
no loyalty to the countries in which they are incorporated but act solely in
their own best interests [1]. TNC represents
extension of business and has the opportunity to enhance its structural
bargaining power versus workers and states, and thus reduce claims by these
stakeholders on its income streams. Such privileged bargaining power is
achieved most simply by placing multiple groups of workers located in different
nations in competition with each other for the jobs that the TNC provides and,
similarly, putting states in competition with each other for the jobs, capital,
technology, tax revenues, etc. that are associated with TNC investment
[2]. A transnational corporation (TNC)
differs from a traditional MNC in that it does not identify itself with one
national home. While traditional MNCs are national companies with foreign subsidiaries,
TNCs spread out their operations in many countries sustaining high levels of
local responsiveness. An example of a TNC is Nestlé who employ senior
executives from many countries and try to make decisions from a global
perspective rather than from one centralized headquarters [3].
Multinational corporations are the most
essential element and one of the
main contours of controllers that
ensure the unity of the global
economy. All financial and commodity flows passes
through transnational corporations and related transnational and it determines the development of the world economy. They are a leading factor in the globalization of the economy, placing their subsidiaries and
branches in different countries. According to these reasons it becomes obvious
how the transnational corporations are important for world economy and if they
disappeared one day the world economy would stop to
develop and it will drop us to
fifty years ago. Firstly, the global economy would decline, and
would operate at 30% out of a possible 100%. Secondly, to solve the issues at
the international level on trade and financial side will be much more difficult
because of the disappearance of branches and subsidiaries of the same company
in different countries. Finally, as an institution of multinationals contribute
the most rapid process of globalization, the uniting states; allowing people of
different nationalities come together with a common goal of creating a
profitable business. Due to the lack of transnational corporations,
globalization would not develop as fast, due to the lack of communication and
co-operation of different nationalities.
Now, when
everybody realizes the especial importance of transnational corporations, we
can move on the next question: Kazakhstan and transnational corporations.
Kazakhstan is a developing country and the stable economy and recognition of
other countries us as a worthy representative of the global business
environment is very important. Kazakhstan has already made notable progress
since emerging from the collapsing Soviet Union 21 years ago. The 2013 annual
Doing Business Report of the World Bank and the International Finance
Corporation (IFC) ranks Kazakhstan 49th of 185 countries surveyed and the
country has attracted more than $160 billion in foreign direct investment (FDI)
since gaining independence. That is 80 percent of all FDI into the five former
Soviet republics of Central Asia. Kazakhstan is also considered one of the most
business- and investment-friendly of the 12 members of the Commonwealth of
Independent States (CIS). And Kazakhstan has already achieved its Strategy 2030
goal of becoming one of the world's 50 most developed countries. "They only have less than 20 places to rise to
crack the top 30," international financial analyst Martin Hutchison told
EdgeKz. "They could certainly do it well within the time frame they've set
for themselves." That goal and the efforts to meet it are ambitious,
multifaceted and cover a broad spectrum of Kazakh life and business. The key
economic targets for the next 38 years are to define new markets, establish
partnerships to promote new sources of economic growth, achieve a favorable
climate for foreign investment, promote sustainable private sector business
development, make small- and medium-sized enterprises the dominant form of
business, develop Kazakhstan's economic infrastructure, diversify exports
beyond oil and gas, promote technological innovation, encourage ecologically
responsible policies, develop agriculture and ensure adequate water supplies.
To accomplish those goals, Kazakhstan will need to integrate its economy with
global and regional environments by capitalizing on its transit potential and
bolstering information technology capabilities. One such effort already
underway is the construction of the Western Europe-Western China transportation
corridor, a series of intercontinental highways and large capacity railway
lines and terminals that will make Kazakhstan the transportation hub of Europe
and Asia. These networks will link two of the greatest industrial regions and
rapidly growing parts of the planet, the European Union and China. As an
oil-rich country and a reliable international partner, Kazakhstan also plans to
lift its existing subsoil use moratorium in an effort to become "a
regional magnet for investment." In return, Kazakhstan will be able to
attract advanced technologies and investment for its industrial development.
The creation of the new Customs Union with Russia and Belarus is also already
providing a major stimulus for investment in and the rapid growth of domestic
industries, especially in such fields as food processing and furniture making.
President
Nazarbayev has also asked the government to pay attention to transnational
corporations and attract foreign companies. This is expected to stimulate new
business growth and build upon Kazakhstan's ranking as one of the 25 easiest
nations out of 185 surveyed in which to start a new business, according to the
World Bank's Doing Business Report. Kazakhstan's Foreign Minister Erlan
Idrissov called Nazarbayev's speech "a powerful large-scale document for
the future." He said "Kazakhstan 2050 is a call to the younger
generation of the people of Kazakhstan to continue along the highway of our
development, focusing on the establishment of a self-sufficient, modern, secular
and democratic state with stable institutions and a strong economy."
Hutchinson agreed with this assessment. "Kazakhstan is doing well and it
has plenty of opportunities to rise rapidly a lot further up the main
international indices for best business and investment climates around the
world. These lists and indices are very important," the British analyst
said. "Major multinational corporations around the world take them very
seriously and are guided by them in their strategic decisions about where to invest
and build major production facilities for the long term." [4]. That is why
head offices and subsidiaries of transnational corporations situated in our
country can bring only benefit and can help to improve the financial situation
of our state. But is it has only advantages and do harm the economy?
Nowadays, the
evaluation of transnational corporations and their impact on economic
development of the national economy and national security have both positive
and negative content. Of course, undeniable advantages of transnational
corporations are by having operations in more than one country, they have
access to multiple sources of resources. If one resource should stop in one
area, it will not be too much of a hardship for other parts of the company that
may be halfway across the world. And expanding the economic base of the state,
the transfer of new technologies, the growth of the overall business activity,
the influx of foreign capital, the growth of employment, improved living
standards of workers and employees in the branches of transnational
corporations.
The increasing
ease of transportation, communication and commerce that characterized the 20th
century has led to ever larger and more global transnational corporations.
These enormous companies can utilize economies of scale to offer goods and
services at lower prices to consumers. However, their existence also leads to a
number of complications and drawbacks:
§
Consolidation of Wealth. Large corporations tend to draw wealth from small communities and
consolidate it in locations where the corporation is headquartered. In extreme
cases, this can lead to the impoverishment of less central communities,
particularly in developing nations. Unlike small, local businesses, which
recirculate both wages and profits through the local community, transnational
corporations pay local employees wages, but take profits away to other
locations. Individuals at the top of corporate pyramids, such as CEOs, are
frequently paid enormous yearly bonuses based on the profitability of the
corporation. This practice intensifies the phenomenon of wealth consolidation.
§
Environmental Damage. The transportation of nearly all goods in the modern economy depends on
the use of fossil fuels. Transnational corporations frequently manufacture
goods in countries such as China and Thailand, where wages are low, and import
them to Europe and North America using large cargo ships. This practice of
extensive transport, combined with the energy and resource use inherent in
large-scale production, leads to extensive environmental damage. The damage
becomes worse because many of the countries where the manufacturing is done do
not have as stringent environmental regulations as countries in Europe and
North America. This lack of enforcement can lead to high levels of pollution,
waste, and worker exposure to toxic substances.
§
Economic Vulnerability. A basic premise of ecology is that diversity equals
stability, and the same applies to economics. A large number of small,
independent companies create a stable economy, because if one fails, the others
continue to function. However, if the economy is dominated by a very small
number of enormous corporations, it becomes more vulnerable to damage by the
failure of any one of them. This situation also presents a challenge to
democracy, because transnational corporations become "too big to
fail," and governments bail them out, even when they are financially
unsustainable. These bailouts, such as those seen in 2008 and 2009 when large
banks were rescued by the U.S. government, often take place without the consent
of the voting population.
§
Cultural Homogenization. As with ecology and economics, cultural diversity is valuable for the
stability that it provides. Multinational trade exposes cultures to one
another. While this can lead to greater levels of understanding between
different types of people, it can also lead to the overwhelming of small, local
cultures by larger and wealthier ones. The result is the replacement of
vernacular ways of living with new ways dominated and shaped by the
corporations themselves. [5]
Also using by
financial power of transcorp, major corporations displace domestic investors
out of the most attractive sectors of the economy, such as oil and gas and
ferrous metallurgy. Also they create
severe pressure on domestic producers, often using methods of unfair
competition
The head of our
country also concerned about this. N. A. Nazarbayev notes that we should create
conditions for the development of transnational corporations on the domestic
market and prevent displacement of domestic investors and producers. After all,
it is the wealth of the state; it can not belong to one firm, which will
dictate terms. [6]
At the moment,
transnational corporations control about 40% of industrial production and 50%
of Kazakhstan's foreign trade. [7] For making the existence of multinationals
in our country the most positive we should conduct a series of reforms.
Firstly, we need to change the legislation of Kazakhstan in the aspects
concerning cooperation with multinational, to tighten the conditions of their
existence, maybe to increase the tax rate. Secondly, to take a China as an
example and to think about the idea of regulating raw material export, it is
necessary to ensure that in our country the domestic manufacturing is on the
its way to developing. Thirdly, to achieve the growth of a number of skilled
workers among the local population, to increase employment, to improve quality
of life and, finally, to dictate our conditions to the multinationals that
operates in our state.
In conclusion, I
would like to notice that transnational corporations still have a lot of
advantages and their can help our country in achieving the target to become a
developed country.
References:
1) www.legal-dictionary.thefreedictionary.com
2) Marc T. Jones, Matthew Haigh. The
Transnational Corporation and New Corporate Citizenship Theory: A
Critical Analysis, - Greenleaf Publishing Ltd, 2007
3) www.wikipedia.org
4) www.edgekz.com
5) www.ehow.com
6) Address of the President of the Republic
of Kazakhstan N.Nazarbayev to the
nation. Kazakhstan’s way – 2050:
common aim, common interests, common future,
2014
7) www.stat.kz