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Q) Explain possible reasons why the government has encouraged foreign multinational company’?(10 marks answer)

• Employment= Multinational companies create employment opportunities for local people. They pay attractive salaries. This helps to increase standard of living of people. Local people acquire new knowledge, skills and attitudes.

• Better products= Multinational companies produce products of internationally recognized brands. They supply better quality products on a regular basis. Such products help to improve the quality of local products.

• Revenue= Multinational companies have high sales turnover. They are important sources of revenue for the government. Revenue can be in the form of tax, value added tax and other taxes.

• Foreign exchange earnings= Multinational companies help to earn foreign exchange. They bring capital in foreign exchange. Their exports earn foreign exchange. The foreign exchange reserves increase in host countries and balance of payment improves.

• Industrial development= Multinational companies help industrial development in host countries. They develop linkages with local industries for supply of raw materials, components and semi-processed products. Service industries develop to serve them. Entrepreneurship develops and industrial climate also improves in the host country

.• Efficiency= Multinational companies carry out their operations efficiently. They make efficient use of resources and bring efficiency by mass production at low cost. They use modern technology and practice better marketing skills and professional management. They bring management revolution.

• International cooperation= Multinational companies promote international cooperation. They have linkages in several countries. Such linkages develop closer relations and understanding with host country.

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