J. Multinational companies are becoming increasingly common in developing countries. What are the advantages and disadvantages of this?

Third

-world countries are the most preferred business locations for many international firms.

This

development generates more jobs in the local community, while it is

also

considered as one of the main reasons for foreign

currency

deficit. On the one hand, an international enterprise provides more job opportunities for young talents in the

host

country. Large globalized firms have businesses around the world, their products are sought after worldwide and they need to manufacture in mass quantity,

this

necessitates to hire adequate manpower locally to manage their production process efficiently, offering jobs for foreign workers are restricted by

host

countries to reduce unemployment.

For instance

, the Indian government allows businesses to establish easily with one exception that they need to utilize 85% of local resources

such

as workforce, and

this

has resulted in high employment.

On the other hand

, multinational firms yearly or monthly transfer profits to their headquarters, most of them are located in the USA or Europe. Locally earned money is converted to commonly transacted

currency

USD and moved to respective bank accounts in main offices.

This

creates a huge influence on the

host

country’s foreign

currency

deposits and reserving

this

is vital to control domestic inflation rate, it is directly linked with spending more local

currency

to import fewer products.

For example

,

a

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research by economic Times has found that countries in Asia losing their foreign deficit by 5% due to multinational companies’ transactions and it has increased 2% of their import cost over the

last

5 years. In conclusion, multinational companies negatively impact

host

countries economy by reducing foreign

currency

reserves,

although

they are beneficial to reduce unemployment of developing nations.