World economic Geography Topic: Transnational Corporation Group: Nguyen Vu Hong Minh BAIU08019 Tran Thi Lan Phuong BAIU08065

OUTLINES TNCs IN VIETNAM THE IMPACT OF TNCs ON WORLD ECONOMY REVIEW STATISTIC OF TNCs THE IMPACT OF TNCs ON WORLD ECONOMY TNCs IN VIETNAM

REVIEW 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.”

STATISTICS 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

(CONTINUED) 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.

SOME TNCS ARE BIGGER THAN SOME COUNTRIES MEASURED BY VALUE ADDED OR GDP, 2000, BILLIONS OF DOLLAR

“the productive core of the globalizing world economy.” IMPACT OF TNCs “the productive core of the globalizing world economy.”

Indicators of the Importance of Transnational Corporations in the Globalization Process 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

The Transnationality Index from 1993 to 2003 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: In 1993, three industries (electronics & computers, motor vehicles, and petroleum & mining) ~ 50 % In 2003, they ~ 30%, all service ~ 25%

Positive Impact 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

Negative Impact 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.

TNCs and VIETNAM 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)

FOREIGN INVESTMENT MECHANISM IN VIETNAM 2010

SWOT ANALYSIS 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

References 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/