Allowing a multinational corporation to locate in a developing country or economy could lead to several benefits to the host country. Firstly, the host country will benefit from increased employment opportunities as the MNC will likely get most of its human resource from the host country. Secondly, the MNC will help the balance of payment by promoting exports and minimizing imports as items that were previously being imported could now be locally produced. The host country could also benefit from taxing the MNC and this could be valuable to the host government’s revenue. The location of an MNC in a host country could also improve the reputation of the host economy.
However, this does not come without a cost as the host country and government will have to deal with influence and political pressure from the MNC. This is because MNC have influence beyond the host country’s boundaries making them more powerful than hos government. The local industries in the host country could also suffer from the competition as MNC could be more efficient in production. Another cost to the host country is that the host economy has to deal with uncertainties as MNCs are known to change and relocate at a very short notice.
Compared to developmental assistances from developmental agencies like the World Bank, private investment in a developing economy is more preferable as it has more gains. This is because research has shown that many loans and grants from the World Bank and similar agencies are not being efficiently used for capital investment. Rather, some of it is being used in recurrent expenditure while a good portion of it is being pocketed by corrupt individuals in the host countries.