Tuesday, November 19, 2013
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
• 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.
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?
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.
o Well equipped, hire highly trained personnel
o Contribute to the length of the conflict
- 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
- 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
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 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
• Make it look like the local communities are benefitting from the mining
• Must find NGO that is willing to cooperate. NGOs are often critical of
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
o Technological advances
Made it possible to separate production between countries
• Greater standardization in both products and in the production of
• Cheap labour, reduce cost. MNC searching around the world to establish
- 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
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
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