Other criticisms of multinationals in the Third World hinge on the fact
that while they claim to be taking capital and technology to underdeveloped
countries, they do in fact extract a net outflow of capital and ensure that theyalways retain control of the technology they introduce. It has been estimated
that multinationals sometimes raise as much as 80 percent of their capital
from local sources. Their own direct investment is thus often relatively
small, boosting the return generated by overall profits on their own capital
to quite staggering heights. In certain industries, the estimated rate of return
on capital invested by the multinationals sometimes runs as high as 400 per~
cent per annum. Given that it is usual to repatriate a major proportion of
profits to headquarters, and hence the parent nation, it is thus easy to see
how a net outflow of capital from the host nation can arise. It becomes
extremely difficult for Third World countries to derive any long-term benefit
from the presence of the multinationals, as host governments usually do
not build any real equity in their industry.
Other criticisms of multinationals in the Third World hinge on the fact
that while they claim to be taking capital and technology to underdeveloped
countries, they do in fact extract a net outflow of capital and ensure that theyalways retain control of the technology they introduce. It has been estimated
that multinationals sometimes raise as much as 80 percent of their capital
from local sources. Their own direct investment is thus often relatively
small, boosting the return generated by overall profits on their own capital
to quite staggering heights. In certain industries, the estimated rate of return
on capital invested by the multinationals sometimes runs as high as 400 per~
cent per annum. Given that it is usual to repatriate a major proportion of
profits to headquarters, and hence the parent nation, it is thus easy to see
how a net outflow of capital from the host nation can arise. It becomes
extremely difficult for Third World countries to derive any long-term benefit
from the presence of the multinationals, as host governments usually do
not build any real equity in their industry.
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