IELTS Essay: Are multinational companies good for the economies of developing countries?

IELTS Writing task 2

Some people believe that allowing multinational companies to open offices and factories in developing countries is good for their economic growth of those countries. Others, however, believe that governments should ask foreign companies to shut shop and help local companies to grow. To what extent do you agree or disagree?

This question is taken from www.ielts-blog.com

Model Answer

Some people believe that developing countries should allow and encourage multinational companies to open offices and factories in their countries because it is good for their economic growth. Others are of the opinion that multinational companies aren’t good for the growth of developing countries. They believe that governments in these countries should encourage the growth of local companies. Both sides of the problem will be discussed in this essay before a conclusion is arrived at.

Multinational companies (MNCs) have business interests in almost all parts of the world. Most MNCs have their headquarters in developed countries. A well-known example is Coca-Cola. It is a known fact that multinational companies contribute towards the growth of global economy. They generate jobs and jobs are good for any economy.

On the flip side, MNCs promote capitalism. They encourage the accumulation of wealth in a few hands. Multinational companies are often accused of exploiting the natural and human resources of developing countries. For example, most of the world’s gadgets are built in developing countries like China and Taiwan. Why do American MNCs like Apple and HP prefer having their gadgets built in these countries?  It is simple: the labour cost in these countries is pretty low as compared to the labour cost in a country like the US or Canada. The products thus made by these underpaid employees who work overtime in substandard working conditions are then exported to other parts of the world where they are sold for high profit margins. That means wealth is generated in one country, but its actual beneficiaries are people living in another part of the world. Doesn’t this amount to the exploitation of human resources?

Now let’s take a look at another side of the problem. Besides exploiting man-power MNCs also exploit natural resources. Multinationals like Coca-Cola and Pepsi have always been accused of exploiting the underground water resources of developing countries. Drought is a major problem in areas where they have built factories. Why do these companies prefer having their bottling plants in developing countries? Because the labour rules and regulations in many developed countries make it difficult for them to obtain necessary permissions to set up plants. In a bid to attract foreign companies and generate more jobs, many developing countries have liberal laws which aren’t always good for the preservation of their natural resources.

So what is the solution? Can developing countries solve these problems by encouraging the development of local companies? Of course – to a certain extent.  Local companies, too, can generate jobs. Because most of these companies only operate in the country of their origin they don’t cause major exploitation of human or natural resources. What’s more, the wealth generated by the operation of these companies benefit the country where they operate from.

When we look at both sides of the issue, it is not difficult to see that encouraging the growth of local companies have several advantages. It doesn’t mean that multinational companies should be asked to shut shop and leave. They, too, should be allowed to operate. But encouraging them at the cost of local companies is certainly bad for the economies of developing countries.