Why mncs are need for the …

Developing countries are becoming a hub of MNCs because of the reason that these countries are most eager and are underway to develop and want to be on par with the developed countries. Thus these countries ease up their norms and regulations and try to attract these foreign companies to open up their business units in these developing nations. Thus, the profit and ease of doing business in these countries makes them a preferred location for MNCs. They Provide an inflow of capital into the developing country. E.g. the investment to build the factory is counted as a capital flow on the financial account of the balance of payments. This capital investment helps the economy develop and increase its productive capacity. The Harod Domar model of growth suggests that this level of investment is important for determining the level of economic growth.The inflows of capital help to finance a current account deficit. (foreign investment enables developing countries to buy imports).Multinational corporations provide employment. Although wages seem very low to us, people in developing countries often see these new jobs as preferable to working as a subsistence farmer with even lower income. Multinational firms may help improve infrastructure in the economy. They may improve the skills of their workforce. Foreign investment may stimulate spending in infrastructure such as roads and transport. Multinational firms help to diversify the economy away from relying on primary products and agriculture – which are often subject to volatile prices and supply.