The role of multinational companies in the economic development of Cameroon: Case study of MTN Cameroon
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This study examined the role of multinational companies (MTN) in the economic development of Cameroon. The data for this research has been conducted using secondary data from 1995 to 2012. This secondary source was mostly extracted from the internet. Inferential statistics tool (OLS) was used to analyze with the aid of STATA12. MTN has contributed significantly to the economic development of Cameroon through education and agriculture. However, as the results showed that there is a positive relationship between MTN and the economic development of Cameroon, MTN will be recommended to continue to support our education and agriculture sector for our country to attain its goal of emergency 2035.
- BACKGROUND INFORMATION
Sub-Saharan Africa enjoyed a period of sustained economic growth since the early 1970s because of the increase in FDI (Foreign Direct Investment). This increase in investment was mainly witnessed in the increased range of MNCs in Sub-Saharan Africa.
The history of MNCs is tied closely to the origins of the trade-in and between cultural communities. These communities remain important in many sectors of the modern economy. One of the major difficulties in early trade was the difficulties of transactions due to the varied and unequal distribution of resources across the globe. As a result of this unequal distribution of resources around the globe, traders have to travel long distances and undergo unusual risk for the hope of gain and trade was quite precious, due to the absolute that some communities enjoyed international trade persisted for many centuries. During this period, transportation was poor and technology to hold inventories was rudimentary. An agent at the right place (spot) at the right time could earn enormous fortunes, especially in times when the demand for foreign goods increased and prices rose astronomically. As a result of the long distance between the agent (trader) and the principal (customer) in exporting countries, an agent could easily and often disappear with the profits. Due to the dishonest behaviour by traders Greif (1989) emphasized the membership in ethnic trading communities. The enclave ethnic group in foreign sites could monitor the activities of agents, principals that could be informed of malfeasance thus deferring their dishonest behaviour.
As a result of this long-distance between agents and principals, there was a need for partnership and companies emerged during the 15th century, coupled with the development of the financial market and banking system. Western states could therefore invest overseas. Also, the increasing wealth of western countries as well as the speed, by which national industries could absorb new loans, encouraged massive foreign investment by the end of the 19th century and early 20th century. This was the period of globalization in terms of the percentages of capital outflows to the total capital accumulation. Hence the increasing rate of foreign direct investment marked the development of multinational companies. Britain’s multinational companies developed during the mid-1800s.
Moreover, MNCs are a recent phenomenon whose roots go deep into the America post, thanks to the marshal plan. This plan was put forward by George Marshal, the United States Secretary of State (1947-1949), in which the US took upon itself to provide economic aid to Europe post world war two. With this plan, many US manufacturers began investing abroad. One of the pioneer investors was a singer (sawing machine manufacturer) who operated a subsidiary in France and later in Britain.
The world is gradually becoming a global village. There has been gradual globalization of the world economy. The international economy has expanded from a microscopic to a macroscopic perspective. The massive growth of the international organization as non-state actors in global politics has been responsible in part for the expansion that has taken place today in international business.
In the last years, Africa has received unprecedented attention from major development agencies United Nations and the commonwealth.
Moreover, countries like China and the United Kingdom have also increased their investment in Africa. This interest from the rest of the world in Africa has been catapulted by positive developments that are happening on the continent.
This, GDP growth increased from 2.5% in 1994 to 5.4% in 2005; inflation continues to decline, reaching 8.5% in 2005, compared to 50% in 1994; FDI inflows increased from about USD 2.4 billion in 1990 to just over USD 18 billion by 2004; In fact, Sub-Saharan Africa is currently enjoying its strongest period of sustained economic growth since the early 1970s. GDP growth of 5.2% in 2006 is expected to increase to 6.3% by the end of the year 2007(Mondi, 2006).
Although Africa may be experiencing this economic growth, the record of regional economic integration in Africa has been limited. Intra-African trade accounts for around 12/5% of cross-border trade and on average for 5.3% of GDP (Soko, 2006).
We can therefore conclude that it is globalization that has led to the rapid expansion of FDI in Africa and multinational companies in Cameroon such as TOTAL, SHELL, GUINNESS, COCA-COLA, PMUC, and ORANGE AND MTN.
Today there are over 5000 MNCs in the world and there are said to be responsible for a stable and increasing share of world trade and most international investment.
- PROBLEM STATEMENT
Multinational companies spread over to third world countries to expand, earn profit and take advantage of the cheap labour in these countries. MNCs, help to improve employment, education and provide new skills, improve investment potentials and equally provide capital and equipment.
Despite the numerous advantages of MNCs, their impact is not felt in Cameroon because of the difficulties in setting up multinational companies. These difficulties range from historical, political, socioeconomic, institutional constraints and poor image. This difficulty is due to the administration bottlenecks o the Cameroon government; also the low purchasing power of Cameroonians limits the settlement of multinational companies in Cameroon thereby hindering economic impact in Cameroon. MNCs take advantage of the political system because they have such a strong impact on the economy. It would be devastating to a country if a corporation decided to remove its large investment from the country’s economy. The company can just pay off the government officials to protect their company from being shut down. The government is then compelled to accommodate the company by modifying its labour and environmental policies. Many CEOs and other employees of MTN are found guilty of crimes such as fraud and tax evasion.
From the above analysis, we can conclude that lack of real commitments, which are backed by the means of political, will. Paper rhetoric alone cannot overcome scarcity and institutional constraints. Secondly, poor governance, weak institutions and poor infrastructure is topping the list. Hence a lot is still to be done to promote the expansion of multinational companies in Cameroon.
Also, multinational companies have strongly been criticized because of their high rate of capital outflow to their home base country (capital flight). Proponents of this view believe that MNCs are instruments for their home base economy and not the economy in which there are located. The world today is a global village and it has strongly been proven that no economy is self-sustainable. This implies that despite all the strategies put in place to disfavour the growth of MNCs in Cameroon there is no gain saving that MNCs like MTN serve as a major instrument for the development of Cameroon and a lot has to be done to promote them.
The relationship between multinational companies and economic development leads us to ask the main question: What is the role of multinational companies in economic development?
Economic development can be sub-divided into different sectors which are the social sector, economic sector. Hence, this sub-division into sectors will lead us to the following specific questions:
What is the contribution of MTN-Cameroon in the social sector?
How does MTN-Cameroon contribute to the economic sector?
1.3 OBJECTIVES OF THE STUDY
The objectives of this study can be divided into 2. The main objective and the specific objectives.
Our main objective consists of examining the contribution of MTN to the gross domestic per capita of Cameroon. This could be achieved through the following specific objectives:
The first specific objective of the study is derived from the research question that is to find out MTN-Cameroon contribution in the social sector.
The second specific objective of the study is to determine MTN-Cameroon’s contribution to the economic sector.
- WORKING HYPOTHESES
H1: MTN contribution in the social sector affects the economic
development of Cameroon.
H2: MTN contribution in the economic sector affects the economic
development of Cameroon.