IR Chapter 13-2 Fall 09 student

IR Chapter 13-2 Fall 09 student - International Development...

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1 International Development  Chapter 13.2 PSC 124 Fall 2009 Northrup
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2 Overview – More Strategies Finish corruption and OPEN system I. Foreign investment – MNCs in the global South II. Technology transfer and green revolution III. Borrowing and third world debt IV. Economic regimes and the global South V. Foreign assistance [In the news – differential impact of climate change on  North v. South; development and wealth gap]
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3 Dealing with Corruption -  Transparency Openness, accountability in government NGO  Transparency International “Corruption is the abuse of entrusted  power for private gain.  It hurts everyone  whose life, livelihood or happiness depends  on the integrity of people in a position of  authority.” “Corruption is both a cause of poverty, and a  barrier to overcoming it. It is one of the most  serious obstacles to reducing poverty.”
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4 South Korea’s OPEN System Seoul Metropolitan government – the  OPEN System  link Mayor Goh Kun OPEN System
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5 I. North-South Business Relations  and Foreign Investment Poor countries have little capital So foreign investment can get  accumulation started What are benefits to MNCs and  what are pros and cons for a  poor country?
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6 What MNCs Look For Favorable regulatory environments – tax breaks,  labor laws, unions Labor supply considerations – cheap and/or  skilled Absorptive capacity – skilled labor force,  developed infrastructure so lower costs to startup Financial stability – low inflation, stable currency  exchange rates Political stability Economic growth
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7 Benefits to MNC Inexpensive to do business Sometimes presence of natural resources MNC has significant control MNC owns facilities – hold as asset MNC controls labor Controls whether to expand or close Can take profits out of country
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8 Benefits to Poor Country Partnership creates jobs Country can build accumulation of capital  to invest in other local industries Charge taxes, fees Lease land Entrée into global economy Can enter into joint ventures and limit  MNC ownership to 49%
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9 Down Side to Poor Country Country relinquishes control Often majority of profits go to MNC Builds infrastructure, policies to benefit MNC  and its industry, not investment in long-term 
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IR Chapter 13-2 Fall 09 student - International Development...

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