Having grown up with Kellogg’s less than two miles from my home I understand the importance of having FDI in a local economy. Many friends parents were employed by Kellogg’s and the company were very prevalent in the local community, arranging parades with Tony the Tiger and the Coco Pops monkey throwing variety packs into the crowds and often sponsoring local fairs and fetes, not forgetting the amazing Christmas tree and decorations that could be viewed from space no doubt. You would almost think that Mr Kellogg’s was a born and bred Stretfordian!
Ah my rose tinted glasses strike again.
The simple truth was that a profit was to be had by having a Kellogg’s plant abroad thus maximising shareholder wealth.
Having a plant in the UK
FDI encourages employment in the host country. Employees pay tax on wages and NI contributions increasing the country’s economy. Employees will spend the wages and put back into the country’s economy helping it grow via VAT expenses and increasing population spending.
FDI is a great way to reduce a company’s carbon footprint therefore reducing the Climate Change Levy. Companies need to be finding a way to incorporate new cleaner energies into their business, or using less carbon emitting fuels. One way of doing this is to open a plant where you want to sell your products. Instead of shipping completed products overseas, make it entirely overseas thus maximising share holder wealth and improving your company’s image as a greener more efficient company.
FDI can be seen as a bad thing as the profit from such a venture is more often that not repatriated to the owning country. There is a limit on the amount of money one company will put into the local economy year on year, they are not there to develop or invest further into the host economy. They are there to maximise their shareholders wealth and to do that they must take out more than they put in.
FDI employment can be viewed as exploitive to the local community. It is no coincidence that huge companies such as Nike and Primark choose “lesser developed countries” to produce their range. Cheaper labour, young labour and longer hours are entirely legal in the regions although by western standards are known as sweat shops and are the subject of many a Panorama. Although from reading the leadership members of the Kellogg’s structure many of them are from the country that they manage, for example Carlos Mejia was born in Mexico City Brisbane , Australia
The general experience of the employee structure of FDI is that the ex patriots hold the jobs of expertise where the local employees do the lower skilled set jobs with no chance of development. A “glass ceiling” environment can be developed where the information to complete the whole package is not shared with the local employees. This prevents the local employees leaving the company and starting a new identical company.
FDI can lead to a decline in local skill sets. If the choice came between digging for diamonds and digging for potatoes, which would you choose?
The highest paid is my answer so I’d probably join the others digging for diamonds.
This will mean a lack of agriculture knowledge and the trade could be lost over a generation. This may not be a bad thing, it could encourage a developing economy to further their skill set and add ‘more strings to their bow’.
So is FDI good bad or ugly??
FDI can be ugly but necessary. FDI can work incredibly well for both the host country and the owners, additional taxes, increase in employment and this has a knock on effect with the entire global economy. The ugly side is the exploitation of local employees especially with the lack of willingness to train them further than menial tasks. On the side of the company, they’re all about maximising shareholder wealth, and FDI is a terrific opportunity to succeed in this.
