World economic Geography potx

Topic: Transnational Corporation
Group:
•
Nguyen Vu Hong Minh BAIU08019
•
Tran Thi Lan Phuong BAIU08065

Principle of comparative advantage:
“Two countries can both gain from trade if, in
the absence of trade, they have different
relative costs for producing the same goods”
( David Ricardo)

Transnational corporation: “corporations
which operate in more than one country or
nation at a time and have become some of
the most powerful economic and political
entities in the world today.”

In 1970, 7.000 TNCs

In 2008:

79.000 TNCs, more than 790.000 foreign
affiliates( UNCTAD)

Total sales of TNCs ~ $ 31 trillions

The value added ( Gross product) of foreign
affiliates worldwide ~ 11% of global GDP in 2007


The number of employees rose to some 82
million

85 % TNCs in the Triad (European Union, Japan and
the United States), only 5% in developing countries:

Six industries dominated: motor vehicles,
pharmaceuticals, telecommunications, utilities,
petroleum, electrical/electronic equipment

Top 100 TNCs account for 11 percent foreign assets,
16 percent of total sales, 12 percent of total
employment.
“the productive core of the globalizing world
economy.”

Foreign direct investment (FDI) : at least 75% of world
flows come from TNCs

International trade: 67% of all exports are directly related
to TNCs through intrafirm operations or trade with third
parties

Evolution by region and country :

In 1993, EU=37, US=32, Japan=21, others = 10

In 2003: EU, more than 50% ; and the increase of

some developing countries.

Shifts across sectors: from the primary sector and
resource-based manufacturing to services and
technology-intensive manufacturing
Note:
1. In 1993, three industries (electronics & computers,
motor vehicles, and petroleum & mining) ~ 50 %
2. In 2003, they ~ 30%, all service ~ 25%

investment and increased export income

introduce unavailable goods and services that are
essential for diversifying production

increase productivity of labor

stimulate local entrepreneurship

opportunity for technology transfer, leads to new
domestic industries

tax revenue for host government

economies of scale, exports more profitable and
competitive, increases national income

introduce inappropriate products, technology, and
consumption patterns


labor-saving technology increases unemployment

Increase gap between rich and poor population

require the subsidiary to purchase inputs from the
parent company

hire the most talented entrepreneurs

limit the transfer of patents, industrial secrets, and
other technical knowledge to local subsidiary

Investing in few industries.

In 2010, FDI- 25% GDP

Key economic and provinces: in the South( Ho
Chi Minh, Ba Ria- Vung Tau, Dong Nai, Binh
Duong, in the North( Ha Noi, Hai Duong, Vinh
Phuc, Hai Phong, Quang Ninh)
STRENGHS WEAKNEESES
•
Relative economic growth
•
Increased investment and industry
•
Good social index

•
Stable political regime,
•
Cheap labor, natural resource
•
Strong domestic demand
•
Investment Law Disappointed
result in FDI
•
Insufficient investment in industry,
poor in infrastructure,
transportation, education.
•
Economic Uncertainty
•
Attach special importance to
oriented development
OPPORTUNITIES THREATS
FDI is too much in the world
•
Global financial
•
WIPS Evaluation

Foreign Investment agency
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International Monetary Fund
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United Nations Conference on Trade and

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