World economic Geography

Topic: Transnational CorporationGroup:

• 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 http://fia.mpi.gov.vn/

International Monetary Fund http://www.imf.org/

United Nations Conference on Trade and Development http://www.unctad.org/

http://www.vietpartners.com/