Human Geography – The Globalisation of Economic Activity Uneven Development in the Global Economy
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Transnational Corporations Case Study – Dow Chemical Dow Chemical is a provider of plastics, chemicals, and agricultural products with presence in more than 175 countries and employing 46,000 people worldwide. It spends more than $1 billion annual expenditure in R&D. Its stated mission is: "To constantly improve what is essential to human progress by mastering science and technology" with the vision: "to be the largest, most profitable, and most respected chemical company in the world". Spatial Organisation of Dow Chemical The Dow Chemical Company has its world headquarters located in Midland, Michigan in the United States of America. Also, Dow Chemical has manufacturing, business centres, sales offices and research and development facilities located in North America, Europe, Latin America, India, Middle East, Africa and the Asia Pacific region. Major production sites are located in: United States: Plaquemine, Louisiana; Hahnville, Louisiana; Midland, Michigan; Freeport, Texas; Seadrift, Texas; Texas City, Texas; South Charleston, West Virginia Canada: Fort Saskatchewan, Alberta; Prentiss, Alberta Germany: Boehlen; Leuna; Rheinmuenster; Schkopau; Stade France: Drusenheim The Netherlands: Terneuzen Spain: Tarragona Argentina: Bahia Blanca Brazil: Aratu Also, locations of plants and holding are as follows: United States: 42 manufacturing locations in 16 states Canada: 6 manufacturing locations in 3 provinces Europe: 49 manufacturing locations in 16 countries Latin America: 26 manufacturing locations in 5 countries Asia Pacific: 22 manufacturing locations in 8 countries India, Middle East and Africa: 5 manufacturing locations in 4 countries Linkages Subsidiaries
Joint Ventures
Impacts Social Impacts on Host Economy
Economic Impacts on Host Economy
Environmental Impacts on Host Economy
TYS Questions 2007 H1 Q7 Or: With reference to one TNC, a) Describe its spatial organization and its structure [9m]; b) Evaluate its social-economic impact on a country in which it operates. [16m]
States and Supranational Bodies State: an organized body of people under a single government, operating within a defined and established geographical boundary. Supranational body: organized body of people operating across geographical boundaries, transcending national spheres of interest. Role of the State in Economic Development The State as a Regulator In order to achieve the most efficient and most beneficial processes, the government plays an important role in regulating economic activity within the country. Its key roles as a regulator are to adjust policies, investment strategies, negotiate terms, all in order to benefit local businesses and the country. The main aim of such regulation is to ensure stability, politically, socially and economically, in order to increase competitiveness. Regulation of wages. In order to ensure a decent standard of living for all citizens, as well as to minimize unfairness, governments can intervene in the labour market with wages and incomes policies. Examples include setting minimum wages to try and ensure people earn at least a living wage to support themselves. For example, the federal minimum wage in the US is $7.25 per hour. States can also regulate their own minimum wage, even adjusting the policy itself – Wisconsin proposed a regulation to index minimum wage every year and adjust from there, in order to alleviate the impact of inflation on minimum wage. Singapore does not have minimum wage regulations, but the National Wage Council gives recommendations on adjustment of wages. For example, in 2011 the NWC recommended an increase in workers’ wages in accordance with the strong economic growth of 14.5% in 2010. Also, in 2008, due to high inflation and uncertain economic outlook, the NWC generally recommended companies to give sustainable wage increases commensurate with the companies’ performance and business prospects, as well as recommending further top-ups to CPF for lower wage, contract and informal workers to assist them further. Regulation of competition. States can promote or maintain market competition via regulating anti-competitive conduct, such as attempted collusion, monopoly, predatory pricing, or mergers and acquisitions. Competition law is intended to increase consumer welfare and promote efficiency. For example, the Competition Commission of Singapore (CCS) issued an Infringement Decision on SISTIC for abusing its market share of around 90% of the ticketing market to raise its prices, levying it with a penalty of $989000. In the US, such laws are known as antitrust laws. In 1999, a coalition of 19 states and the federal Justice Department sued Microsoft for anti-competitive behaviour. A trial found that Microsoft had strong-armed many companies in an attempt to prevent competition from the Netscape browser. Regulation for protection. In order to combat the footloose nature of TNCs, some countries have put in place regulations to protect local firms and industries. Protectionism itself is inherently against the concept of free trade, so governments are also able to institute laws which are anti-competitive by nature in order to protect local companies. For example, some countries might make it a requirement for foreign TNCs investing locally to source a certain percentage of their production materials or capital from local firms, such as Nestle in Korea being required to use Korean-made machinery. This is in order to increase the multiplier effect of TNCs on the local economy, reducing profit leakage overseas. There is also the “Infant Industry Argument” for protectionism, where protectionist measures are made to nurture newly started companies in the country by restricting competition from abroad. For example, from 1816 through 1945, tariffs in the USA were among the highest in the world, and they successfully industrialized behind such protection. Also, during the 1980s Brazil enforced strict controls on the import of foreign computers in an effort to nurture its own "infant" computer industry. The effects of such protection vary – companies can find ways to bypass these, or it may be a case of government failure, where governments do not have knowledge on whether such infant industries may be successful. The Brazilian computer industry never matured; the technological gap between Brazil and the rest of the world actually widened, while the protected industries merely copied low-end foreign computers and sold them at inflated prices. Regulation for environment. This is concerned with reducing negative externalities brought about by environmental degradation. Due to processes like urbanisation and industrialisation, the need for such laws is required to maintain and increase the standard of living and health standards for people. Apart from that, environment laws are also advantageous to the image of the country in both living standards and government policy enforcement, which in turn can attract more investors. For example, Jurong Island is touted as a model of sustainable development, which will be achieved through energy optimisation, water sufficiency via desalination and waste-water collection and recycling, as well as enhanced efforts to reduce emissions and improve already high standards of processing. The State as a Competitor Competing for investments. In order to gain advantages for the nation and the national economy, the government creates and cultivates a suitable environment for investors, mostly via creating pull factors, tax grants, subsidies, special economic zones and other carrots. Many economists credit Ireland's growth to a low corporate taxation rate (10 to 12.5 percent throughout the late 1990s). In the 1990s, the provision of subsidies and investment capital by Irish state organisations (such as IDA Ireland) encouraged high-profile companies like Dell, Intel, and Microsoft to locate in Ireland. These companies were attracted to Ireland because of its European Union membership, relatively low wages, government grants and low tax rates. EDB Singapore in 1961 developed Jurong Industrial Park. Tax incentives, ready-made factory buildings attracted Texas Instruments in 1969, as well as National and Fairchild shortly after. 21 billion was invested by foreign firms in Jurong Island in 2000. Jurong Island in Singapore is home to many companies in the petrochemical industry, like BP, ExxonMobil and Shell. The island also has a network of pipelines that allows for seamless integration among companies. For example, Japan's Teijin can receive piped-in chlorine produced by CIFE company and bisphenol A from Mitsui Chemicals to make polycarbonates, showing the extent of linkage and infrastructural development. Competing with other economies. The management of the economy as a whole and the achievement of the macroeconomic aims are the key targets of any government. One of the main focuses, as such, is the implementation of supply-side policies to increase the economy’s productive capacity and quality to improve its competitiveness in the global economy. For example, increasing focus on R&D – China doubled the percentage of its GDP invested in research and development from 0.6 in 1995 to 1.3 in 2005, while South Korea’s funding has risen from 9.8 billion in 1994 to 19.4 billion in 2004. As a result, Asia’s share of global high-tech exports has grown from 7% in 1980 to 25% in 2001. Apart from that, cultivating an entrepreneurial and innovative culture also increases the productivity of the economy. Spring Singapore, a government arm of the Singaporean government spent 18.5 million in 2009 in helping SMEs start up and expand. Spending on education also raises the literacy rate of the workforce, raising its level and helping it progress to higher-end sectors of the economy a well as increasing incomes. In Singapore, studies show that an additional year of education increases earnings by 13.2%, and every additional year of tertiary education yields 18.7% of increased earnings. According to the World Bank 2007 report on globalization, rising education levels have boosted Asian growth to up to 2 percentage points per year. FDI also favours countries with a higher education rate because it is an indicator of a higher quality workforce. The State as a Collaborator Collaborating with other countries. International cooperation across geographical state boundaries, such as the creation of Free Trade Areas, has become increasing useful in today’s economically interdependent world. For example, the reduction of trade barriers in Free Trade Areas has seen a greater mobility of trade as well as capital and labour moving across borders, resulting in greater economic efficiency and an overall rise in income. CAFTA, The China-ASEAN Free Trade Area has a combined gross domestic product of US$6.6 trillion (S$9.3 trillion), 1.9 billion people and a total trade of US$4.3 trillion. The removal of trade barriers and standardisation across the EU makes it much easier to access a giant market with huge potential. However, there is a downside – one of the key arguments for protectionism is to prevent dumping of cheap goods and predatory pricing. With trade barriers down, massive smuggling of goods from China has disrupted practically all Asean economies. For instance, with some 70-80 per cent of shoe shops in Vietnam selling smuggled Chinese shoes, the Vietnamese shoe industry has suffered badly. In the case of the Philippines, the local shoe industry, along with the vegetable industry, has also been hit badly by smuggling of Chinese goods. Indeed the range of goods negatively affected is broad, including steel, paper, cement, petrochemicals, plastics, and ceramic tiles. Many Philippine companies, even those that were competitive globally, had to close shop or reduce production and employment due to smuggling. Collaborating with TNCs. Essentially, governments initiate linkages with TNCs in order to integrate their processes more with the local economy, creating technology and skill transfers as well as ensuring profits. For example, government linked companies can go into joint ventures with foreign TNCs. For example, the Sri Lankan government proposed to sign a US$425 million apatite mining deal with two TNCs, USA’s IMC Agrico and Japan’s Tomen Corporation. Also, they can link up local companies with TNCs in order to widen the base of the multiplier and trickle-down effect. The Local Industry Upgrading Programme in Singapore has seen Apple, Microsoft, Oracle assist local firms by providing technology access. In Ireland’s National Linkage Programme, local firms are connected to TNCs, resulting in a 33% employment increase. The State as an Employer Employing the public sector. The government employ people in the public sector for a government department or agency. Civil servant jobs are regarded as jobs with a good pay, decent safety net as well as good benefits. With regards to the economy, the government can make use of the civil service to alter the supply of jobs in the market. For example, in 2009, the Singapore Budget had a section for increasing government hiring – 7500 jobs in teaching and support, 4500 jobs in healthcare and hospital administration, 1400 for the Home Team, 2000 jobs for MINDEF and 2600 jobs for the rest of the public service. This serves as an injection of government spending into the economy, as well as provision of jobs and income to keep the economy running, especially during the financial crisis of 2008-2009. Export Processing Zones (EPZs) – State-led Economic Zones State led economic zones, such as industrial parks and EPZ, are spatial expressions of state involvement in the economy. By building places such as hubs and zones, the government is hopefully delineating and allocating land use efficiently, concentrating similar kinds of businesses together to form linkages and economies of scale, as well as providing the necessary infrastructure and providing tax reliefs or grants to attract investors to do business. A free trade zone (FTZ) or export processing zone (EPZ) is an area of a country where some normal trade barriers such as tariffs and quotas are eliminated and bureaucratic requirements are lowered in hopes of attracting new business and foreign investments. It is a region where a group of countries has agreed to reduce or eliminate trade barriers. Free trade zones can be defined as labour intensive manufacturing centres that involve the import of raw materials or components and the export of factory products. These zones are often used by multinational corporations to set up factories to produce goods. In 1999, there were 43 million people working in about 3000 FTZs spanning 116 countries producing clothes, shoes, sneakers, electronics, and toys. The basic objectives of EPZs are to enhance foreign exchange earnings, develop export-oriented industries and to generate employment opportunities. Usually, these zones are set up in underdeveloped parts of the host country; the rationale is that the zones will attract employers and thus reduce poverty and unemployment, and stimulate the area's economy. Shenzhen Special Economic Zone. Special economic zones (SEZs) have played an important role in advancing economic reform in China and in opening up its economy to the rest of the world. The Shenzhen SEZ was the first SEZ to be setup in the PRC. Over the past few decades, Shenzhen has developed from being a small fishing village in Guangdong Province into a major industrial and financial centre, benefiting substantially from the liberal economic policies granted by the Central Government to SEZs. Shenzhen's rapid development has showcased the advantages of “open door” policies and market-oriented reforms, served as a “laboratory” for piloting policies, and propelled economic development in the rest of the country. Essentially, a SEZ is an administrative division: it can span an entire province, such as Hainan. SEZs in the PRC tend to cover large geographic areas. Shenzhen, for instance, spans nearly 2,000 square kilometres. A SEZ in the PRC is intended specifically as a pilot area in which comprehensive economic reforms can be carried out and the zone opened up to the rest of the world economy. It is thus mandated to “experiment,” and accorded the “the right to experiment” by the Central Government. This is equivalent to granting a SEZ a high degree of autonomy in implementing economic policies The PRC’s SEZs are located in coastal areas with easy access to ports and transport networks. Moreover, they are specially set up in areas adjacent to the PRC's “internationalized” cities, economic hubs, or neighbouring countries. Shenzhen borders Hong Kong, China. Finally, SEZs are subject to “preferential policies” on land, taxation, customs clearance, the use of foreign capital and profit repatriation by foreign investors, imports and exports, finance, and logistics. During the last few decades, Shenzhen has developed at a phenomenal pace, now famously referred to as “Shenzhen speed.” From 1980 to 2005, the average annual growth rate of the gross domestic product (GDP) of Shenzhen was 27%. In 2006, Shenzhen's total GDP was $71.3 billion, ranking it fourth among the PRC's rapidly growing cities, and very close to the third-ranked city, Guangzhou. Its per capita GDP was ranked first in the country at more than $8,619 compared with the national average of about $2,000. Since 1979, Shenzhen's industrial base has continued to grow rapidly. The average annual growth rate of industrial value added was 40.2% between 1980 and 2004. In 2005, telecommunications, computers, and electronics accounted for almost 60% of the total industrial output in Shenzhen Firms in Shenzhen have gradually established their own brand names. By the end of 2005, there were five Shenzhen brands with sales of more than Yuan10 billion (about $1.25 billion). Huawei and Zhongxing, both large manufacturers of electronic and telecommunications equipment in Shenzhen, have become major suppliers in this sector not only in the PRC but also worldwide. In 1979, the actual use of foreign capital amounted to $153.7 million; by 2006, it had reached $3.3 billion. International companies of office automation in Shenzhen include Ricoh, Toshiba, Epson, Copier, and Xerox. Their “Shenzhen plants” generate a total output equivalent to about 21% of the world's total outputs by these companies. Other major investors include Wal-Mart, Compaq, Sony, Intel, IBM, and Siemens. In all, 141 of the world's top 500 multinational companies have currently invested in Shenzhen. Directory: 2012 2012 -> The Case Against the nypd’s Quota-Driven ‘Broken Windows’ Policing What Is It? 2012 -> Annual InStructional unit plan 2012 -> University of Hawai‘i Maui College dental assisting program review october 21, 2013 2012 -> Committee on the rights of the child the rights of all children in the context of international migration 2012 -> Background on the Haitian Earthquake 2012 -> The Collected Wisdom of Science Olympiad Coaches 2012 -> Federal Communications Commission fcc 12-81 Before the Federal Communications Commission 2012 -> Aa and na members Dying from Tobacco 2012 -> [Baby Crying] 01: 04 [Ching Download 251.58 Kb. Share with your friends:
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