Topic: Transnational Corporation Group: • Nguyen Vu Hong Minh BAIU08019 • Tran Thi Lan Phuong BAIU08065
Principle of comparative advantage: “Two countries can both gain from trade if, in the absence of trade, they have different relative costs for producing the same goods” ( David Ricardo) Transnational corporation: “corporations which operate in more than one country or nation at a time and have become some of the most powerful economic and political entities in the world today.”
In 1970, 7.000 TNCs
In 2008:
79.000 TNCs, more than 790.000 foreign
affiliates( UNCTAD)
Total sales of TNCs ~ $ 31 trillions
The value added ( Gross product) of foreign affiliates
worldwide ~ 11% of global GDP in 2007
The number of employees rose to some 82 million
85 % TNCs in the Triad (European Union, Japan and the United States), only 5% in developing countries:
Six industries dominated: motor vehicles,
pharmaceuticals, telecommunications, utilities, petroleum, electrical/electronic equipment Top 100 TNCs account for 11 percent foreign assets, 16 percent of total sales, 12 percent of total employment.
“the productive core of the globalizing world economy.”
Foreign direct investment (FDI) : at least 75% of world flows
come from TNCs
International trade: 67% of all exports are directly related to TNCs
through intrafirm operations or trade with third parties
developing countries.
Evolution by region and country : In 1993, EU=37, US=32, Japan=21, others = 10 In 2003: EU, more than 50% ; and the increase of some
Note: 1. In 1993, three industries (electronics & computers, motor
vehicles, and petroleum & mining) ~ 50 %
Shifts across sectors: from the primary sector and resourcebased manufacturing to services and technologyintensive manufacturing
2. In 2003, they ~ 30%, all service ~ 25%
essential for diversifying production
investment and increased export income introduce unavailable goods and services that are
domestic industries
increase productivity of labor stimulate local entrepreneurship opportunity for technology transfer, leads to new
competitive, increases national income
tax revenue for host government economies of scale, exports more profitable and
consumption patterns
introduce inappropriate products, technology, and
company
laborsaving technology increases unemployment Increase gap between rich and poor population require the subsidiary to purchase inputs from the parent
technical knowledge to local subsidiary
hire the most talented entrepreneurs limit the transfer of patents, industrial secrets, and other
Investing in few industries.
In 2010, FDI 25% GDP Key economic and provinces: in the South( Ho Chi Minh, Ba Ria Vung Tau, Dong Nai, Binh Duong, in the North( Ha Noi, Hai Duong, Vinh Phuc, Hai Phong, Quang Ninh)
STRENGHS
WEAKNEESES
•Relative economic growth •Increased investment and industry •Good social index •Stable political regime, •Cheap labor, natural resource •Strong domestic demand
OPPORTUNITIES
•Investment Law Disappointed result in FDI •Insufficient investment in industry, poor in infrastructure, transportation, education. •Economic Uncertainty •Attach special importance to oriented THREATS development
FDI is too much in the world
•Global financial •WIPS Evaluation
Foreign Investment agency http://fia.mpi.gov.vn/ International Monetary Fund http://www.imf.org/ United Nations Conference on Trade and
Development http://www.unctad.org/
http://www.vietpartners.com/
