Many developing countries invite foreign investors to their countries for economic development. They have increased their per capita income as a result of foreign investment. Production is increased by investment. For import substitutions and export oriented industries, multinational companies are necessary. Multinationals have contributed significantly in the technological development of many countries. Hence, at present, the popularity is increasing. The country needs multinationals for the following reasons:
- Economic development: The developing countries like Nepal need multinational companies for the economic development of a country. Usually developing countries have low level of saving and investment. The shortage of capital has been compensated to a greater extent by the multinationals because they bring necessary capital and advanced technology. The production of a country is increased, which gives opportunities to save and removes poverty in the country. Hence, the economic development of a country is accelerated by the funds brought by the multinational companies.
- Extended market: Multinational companies enjoy international market, huge capital, advanced technology and expertise. With the help of mass production, trade can be extended to many neighbouring countries. This increases the export capacity of the country. Hence, it provides an opportunity to rectify the unfavourable balance of trade.
- Utilization of resources: Multinational companies exploit the untapped natural resources of the economy. In developing countries, necessary raw materials are available sufficiently. Such unutilized resources are utilized by them. The multinational companies help in the use of surplus resources also, which would have not been utilized in the absence of them.
- Employment opportunity: By establishment of multinational companies, people can get employment directly in them. With the increase in production and distribution of goods, indirect employment opportunities also increase. Hence, they increase the employment opportunities in the host country.
- Increase in standard of living: Multinational companies utilize mass production system to increase production. IT increases productivity, wages, production of high quality products with low cost of production. Hence, they increase production and purchasing power of the people and increase the standard of living.
- Minimization of transportation cost: The transportation cost is higher when the far developed countries export their products. Hence, to minimize the transportation cost, bigger companies of developed countries establish multinational companies in host countries.Host countries as well as investing countries are benefitted by the activities of multinationals. They provide significant opportunities to international marketing. They enlarge international markets without the problems of tariff and non-tariff barriers.
Growth of Multinational Companies in Nepal
Multinational companies are the business organizations with a new type of concept. They have contributed significantly in the economic development of the country. Today, no country can afford to live without multinationals.
The history of origin and development of multinational companies in Nepal is not very old. In Nepal, history of industrial development began with Indian Joint Venture. In fact, Indian industrialist with join venture promoted and developed industries in Nepal. For example, Biratnagar Jute Mills (1993 B.S.), Birgunj Cotton Mills (1993 B.S.), Morang Cotton Mills (1999 B.S.), Morang Sugar Mill (2004 B.S.) etc. The ownership of these companies remained in two national industrialists. They were established due to open border and open economic relationship. Hence, they are not considered as multinationals and multinational companies were very developed very late in Nepal.
Hotel Soaltee can be considered as the first multinational company of Nepal. In 2026 B.S., famous Indian Oberoi group took over the management and its name became ‘Hotel Soaltee Oberoi’. In 2041 B.S., Ever Ready Battery of the world famous Union Carbide Company and Coca-Cola, Fanta were produced.
Specifically, the growth of multinational companies begin from 2042 B.S. in Nepal. In 2042 B.S., the then His Majesty’s Government adopted Structural Adjustment Programme to liberalize economic policy with the cooperation of World Bank. After the implementation of this programme, the business of multinationals in Nepal have increased. At present, 10 banking sectors, 8 manufacturing sector, 6 soft and hard drinks sector, 5 electronic sector and some hotels are operating under multinational companies in Nepal.