Topics

The impact of multinationals on the host country

What "host country" means

The host country is the country a multinational operates in, as distinct from its home country where it is owned and headquartered.
New Zealand is a host country for many multinationals, and New Zealand businesses that expand offshore become multinationals in someone else's host country. The analysis works both ways.
The teaching guide lists this as its own content area, and the exam expects both sides of it.

The asymmetry in that picture is the whole argument. The activity — the work, the resource use, the effect on a community — happens in the host country. A large share of the value, and all the decisions about it, end up somewhere else.

Employment. Jobs created directly, and more in the local businesses that supply the operation.
Investment. Capital that the host economy did not have to raise, spent on plant, buildings and infrastructure.
Skills and technology transfer. Local staff are trained in methods and equipment that then spread through the economy when they move jobs.
Local supply chains. Local suppliers gain a large, stable customer and often have to raise their standards to keep it, which makes them better suppliers to everyone.
Tax revenue from company tax, employment taxes and consumption taxes.
Exports and foreign exchange, where the operation produces for export.
Consumer benefit. More choice, sometimes lower prices, and access to products the local market could not produce.
Standards. Multinationals often bring employment, safety and environmental practices above the local minimum.

Profits leave. The returns flow to shareholders in the home country rather than staying in the host economy.
Local businesses are displaced. Smaller domestic competitors lose market share and close, and the jobs created may be fewer than the jobs lost.
Weak bargaining position. A large employer can press for tax concessions, weaker regulation or subsidies, because it can credibly move elsewhere.
Decisions are made offshore. A plant can be closed by a decision taken in another country for reasons that have nothing to do with its local performance.
Environmental cost. Where regulation is weaker, production may impose costs the host country bears.
Working conditions. Wages and conditions may be low by the home country's standards even when legal locally.
Cultural impact. Global brands and formats can displace local products, practices and, in some cases, language.
Resource extraction. Where the operation depends on land, water, minerals or fisheries, the resource is consumed locally and the value realised elsewhere — the point at which kaitiakitanga and rangatiratanga become directly relevant.
Transfer pricing. Multinationals can arrange prices between their own subsidiaries so profit is declared in low-tax countries, reducing the tax the host country collects.

The host country is the country a multinational operates in, as distinct from its home country where it is owned and headquartered.
New Zealand is a host country for many multinationals, and New Zealand businesses that expand offshore become multinationals in someone else's host country. The analysis works both ways.
The teaching guide lists this as its own content area, and the exam expects both sides of it.

The asymmetry in that picture is the whole argument. The activity — the work, the resource use, the effect on a community — happens in the host country. A large share of the value, and all the decisions about it, end up somewhere else.

Employment. Jobs created directly, and more in the local businesses that supply the operation.
Investment. Capital that the host economy did not have to raise, spent on plant, buildings and infrastructure.
Skills and technology transfer. Local staff are trained in methods and equipment that then spread through the economy when they move jobs.
Local supply chains. Local suppliers gain a large, stable customer and often have to raise their standards to keep it, which makes them better suppliers to everyone.
Tax revenue from company tax, employment taxes and consumption taxes.
Exports and foreign exchange, where the operation produces for export.
Consumer benefit. More choice, sometimes lower prices, and access to products the local market could not produce.
Standards. Multinationals often bring employment, safety and environmental practices above the local minimum.

Profits leave. The returns flow to shareholders in the home country rather than staying in the host economy.
Local businesses are displaced. Smaller domestic competitors lose market share and close, and the jobs created may be fewer than the jobs lost.
Weak bargaining position. A large employer can press for tax concessions, weaker regulation or subsidies, because it can credibly move elsewhere.
Decisions are made offshore. A plant can be closed by a decision taken in another country for reasons that have nothing to do with its local performance.
Environmental cost. Where regulation is weaker, production may impose costs the host country bears.
Working conditions. Wages and conditions may be low by the home country's standards even when legal locally.
Cultural impact. Global brands and formats can displace local products, practices and, in some cases, language.
Resource extraction. Where the operation depends on land, water, minerals or fisheries, the resource is consumed locally and the value realised elsewhere — the point at which kaitiakitanga and rangatiratanga become directly relevant.
Transfer pricing. Multinationals can arrange prices between their own subsidiaries so profit is declared in low-tax countries, reducing the tax the host country collects.