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POLB90 Lec 11.docx

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Political Science
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Matthew Hoffmann

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POLB90 Tuesday, November 19, 2013 Lecture 11 MNCs: Part II Mining/Petroleum/Security MNCs (concluded) and Export Processing Zones Colombia: MNCs, Paramilitaries Guerillas, and the State (continued) - Mining development provide some job, not many. Does not provide much in a way of spin offs, doesn’t trigger growth in other parts of the economy - Funded the Colombian military o MNC contributed to the Colombian’s government’s ability to fund the military  Taxes  Subcontracted protection • Pay Colombian military to provide security - Oil companies back U.S. military aid to Colombia (Plan Colombia) o The U.S. government wanted to a part of it as well o Amilitary aid program to end drug production and trafficking o Involved extracting resources, provided millions of dollars, directly involved the U.S. military Private Security MNCs (PSMNCs) - Privately owned companies that provide aid (former police/military personnel) to provide guided protection and offensive action. - Contracting out of military and security functions o Buy it rather than doing it themselves - Who hires them? o Governments  U.S. hired private security companies to the drug production in Colombia  Becomes a reflection of neoliberalism, don’t’have to spend much on military expenditures if able to contract out military functions. o Oil and Mining MNCs  Some have own security divisions within the company. Some don’t, in this case, MNC hire security companies to protect mining installation form the Guerillas. - Impact o Well equipped, hire highly trained personnel o Contribute to the length of the conflict New Strategies? - Case of Tanzania: Canadian MNC (Barrette Gold) invested in Mining, when mining gold, create mountains of residue which contains traces of cold. Everyday poor villagers would come to the installation (which was secured by security) and bribe the security to allow the access and be able to support them. o The last time the locals tried to bribe the police, shots were fired: 5 dead, many wounded. Gold company stated that it was not their fault; they can’t tell the police what to do. - Lucrative mining companies surrounded by poor people trying to survive on the residue left by mining companies. - Shell (Petroleum Company) in Nigeria, facing criticism over many decades. Increasingly mediate tensions through using NGO with relationship of local communities. o Indirect rule: use intermediaries in order to deflect attention to someone else (e.g. local chief) o Set up regional councils in petroleum area, to dispense compensation to members of the community that signed the petitions. Make local community committed to Shell’s activities and to persuaded there’s a partnership there: benefit local community. - Using NGOs as intermediaries o Nigeria o Canada- Harper government  The extractive Sector Corporate Responsibility Counselor, 2009  NGO co-operation with mining companies • 6.7 million dollars for 3 partnerships. (one being Barrette Gold with World Vision) The NGO would go into local communities to help with education programs, set up health clinics, and contribute to helping the communities. • Make it look like the local communities are benefitting from the mining companies  Criticisms • Must find NGO that is willing to cooperate. NGOs are often critical of mining companies. FDI (Foreign Direct Investment) in Manufacturing - 1950s to 1960s: Production for the Domestic Market o U.S. became the financial and industrial power of the world o High tariffs as a way to industrialized. MNMC jumped the tariffs. o Expansions of many countries and companies into GS countries to meet the demands of the domestic market - 1970s on: Globalization and the Separation of Production Stages o Increase Competition  U.S. companies in one hand and Japanese and European companies on the other hand o Technological advances  Made it possible to separate production between countries • Greater standardization in both products and in the production of products. • Cheap labour, reduce cost. MNC searching around the world to establish labour production - MNC seek to reduce production costs, especially labour - Encouraged by IFIs and by the policies of GS countries Contributions of FDI in Manufacturing - Brings in capital for investment - Diffuse modern technology o Contribute in how to bring in technological methods. Directly with the sidurary. o MNC make agreements with local manufacturers and sell license and patents - Stimulate economic growth - Provide employment - Contribute to export earnings/foreign exchange Export Processing Zones (EPZs/Maquilas) - Definition: Industrial zones offering special incentives for (usually foreign) investors to set up in order to process imported materials and then re-export them - Incentives to encourage investment: o Exemption from some or all import duties and taxes o Repatriation of profits  Whatever profits are made, company can send the $ to anywhere they want not obligated to invest again into the country. o Use of infrastructure free of charge o Flexible labour regime/waiver of labour law regulations  Want to not have rigid control over hiring/firing, pay as low as possible for labour. Features of EPZs - From garments and electronics to everything else o Also produce in food, pharmaceutical, communication equipment. - Transformation of export profiles o When thinking of GS countries, their economic problems, contribute it to Gunder-Frank idea. o Mexico used to be agriculture and petroleum exports. Now more on manufactured good - Domestic and foreign investors o Initially true, MNC took one stage of processing to another country and established an enterprise.At same time, becoming increasing advantageous, allow domestic suppliers
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