MNCs as a pillar of economic growth and well-being

15

Robert Uberman, Multinational Corporations (MNCs)

MNCs versus stakeholders (States, Societies) in future

• MNCs as a pillar of economic growth and well-being

• MNCs as a threat to economic sovereignty

• MNCs as business partners


Can MNCs post a challenge to most developed countries?


Even EU commission on risks concerning foreign investments

• In addition, the Commission committed to start a detailed analysis of FDI flows into the EU and to set up a coordination group with Member States to help identify common strategic concerns and solutions in the area of foreign direct investment.

COMMISSION STAFF WORKING DOCUMENT on FOREIGN DIRECT INVESTMENT IN THE EU Following up on the Commission Communication "Welcoming Foreign Direct Investment while Protecting Essential Interests" of 13 September 2017 , Bruksela 2019, p. 5


MNCs influence on economies

• Direct investments

• Non-equity modes (NEMs) of international value/supply chains

• Trade


FID flow - global structure – nominal values in billions USD


0

200

400

600

800

1000

1200

1400

1600

1800

2010 2016 2018 2010 2016*adjusted

2018*adjusted

602

1032

557 749

1255

713

55

59

46

2

22

13159

142

147 36

1

8

58

27

83 12

36

77

302

416

428

67

400

435

68

68

34

14

30

49Transiitional economies

Pacific Rim

Rest of Asia

Latin America

Africa

Developed countries

Napływ Outflow

FID flow – developed countries as the only net contributor


-300

-200

-100

0

100

200

300

De

velo

ped

co

un

trie

s

Afr

ica

Lati

n A

me

rica

Re

st o

f A

sia

Pac

ific

Rim

Tran

siit

ion

al e

con

om

ies

2010

2016

2018

FDI – industry structure


• Source: UNCTAD, 2019, F. 1.8

FDI benefits – most frequently mentioned in media

• Financial support

• Access to a marketing know-how

• Access to business practices

• Access to technologies

• Inclusion into intracorporate supply chains


FDI costs & threats – most frequently mentioned in media

• Employment reduction

• Elimination of local managers

• Elimination of various activities and their transfer abroad

• Profit and assets transfer

• Elimination of local suppliers

Robert Uberman, Korporacje międzynarodowe

MNCs FDI – mode of entry


• Source: UNCTAD, 2019, Fig. I-7

N(on) E(quity) M(odes) of influence

• Non-equity modes (NEMs) of international production growing

• Over $2 trillion in sales in 2010, much of it in developing countries.

• NEMs include for example:– contract manufacturing,

– services outsourcing,

– franchising & licensing,

– contractual relationships through which MNCs coordinate activities in their global value chains (GVCs) and influence the management of host-country firms without owning an equity stake in those firms.

• Source: UNCTAD, 2011, p. xviii


FDI in Poland (1)


Source:

NBP

Shares Bonds Shares

Profits re-

invested Bonds

Profits re-

invested Dividends Interests Shares Bonds

2012 472 598 144 078 12 447 18 254 9 757 18 254 27 518 6 258 9,69% 4,34%

2013 540 261 149 989 5 675 - 14 732 2 401 14 732 36 269 7 235 9,44% 4,82%

2014 569 117 172 600 13 297 25 939 5 775 25 939 29 592 8 596 9,76% 4,98%

2015 543 297 182 255 21 879 29 145 6 539 29 145 30 092 8 270 10,90% 4,54%

2016 580 101 206 181 7 750 37 295 16 818 37 295 35 373 9 281 12,53% 4,50%

2017 639 016 197 827 3 992 - 39 048 392 - 39 048 32 865 9 306 11,25% 4,70%

2018 649 860 213 093 17 888 35 162 4 724 35 162 40 222 9 392 11,60% 4,41%

2019 688 827 203 350 4 091 43 395 5 819 - 43 395 35 947 8 221 11,52% 4,04%

As of Year End Inflow/outflow within the year Profits sources & re-invested ROI

FDI in Poland (2)


Source: NBP, own calculations

12,27% 11,82%10,80%

6,86%

9,05%

0%

2%

4%

6%

8%

10%

12%

14%

0

50

100

150

200

250

300

350

TheNetherlands

Germany Luxemburg France Remaining

bln

PLN

As of Year End Payback ROI

11,59% 11,21% 10,83%

9,15%

11,52%

0%

2%

4%

6%

8%

10%

12%

14%

0

50

100

150

200

250

bln

PLN

As of 2019 End Payback ROI

2016: The Netherlands, Germany

and Luxemburg 2 pp. above the

average

2019: The Netherlands, Germany

and Luxemburg equal to the

average or below

Foreign investors as % of market value in Europe


Local companies vs MNCs

• All MNCs aim at increasing their overall value, regardless where it is to be achieved

• Despite the heated rhetoric surrounding globalisation, industries actually vary a great deal in pressures they put on companies to sell internationally

• Companies from emerging markets has been able to compete successfully at first on national markets and then globally providing they were able to built on carefully selected national strength of their countries of origin (Samsung, Petronas)

• But their success require independence from direct influence of governments

• Dawar, Niraj, Tony Frost, „Competing with Giants. Survival Strategies for Local Companies in Emerging Markets”, Harvard Business Review, vol. 77, no. 2, March-April, 1999 r.


Development model for small and medium companies – specialised industries


0%10%20%30%40%50%60%70%80%90%

100%Global MNCs

Global productniches

Regionaldiversifiedsegments

Regional productniches

MNCs as a pillar of economic growth and well-being

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