CHAPTER ONE
INTRODUCTION
- BACKGROUND OF STUDY
Over the past three decades, China has been the world’s fastest-growing economy, with its multinational companies (mncs)1rapidly emerging and becoming leading global players. The country’s “go global” policy has catalyzed the growing engagement of Chinese MNCs on the African continent. As one of the promising tripolar global economic entities, China’s growing relationship with Africa has been both unprecedented and impressive. As the Sino-African economic and business partnership surges forward, the matter of human rights protections is increasingly becoming an imperative ingredient for any successful business. Responsible corporate actors should take into account the impact of their investment on both the economic and social arenas of the host country. However, the role that Chinese mncs have been playing in the African continent’s sustainable development remains uncertain.
Although, the origin of multinational enterprises dates back to the early fifteenth and sixteenth centuries, when European business companies started moving to various parts of the globe (Akanegbu, 2014; Awolusi, 2012; Awolusi, 2012b), since the mid-1970s, multinational corporations have rapidly expanded business activities on a worldwide basis through foreign direct investment (Otokiti, 2012).For example, the British East India Company (1599-1858)and the Hudson’s Bay Co. and the Royal African Co. were also created in the same way by British merchants with the objective of trading with America and Africa respectively (Akanegbu, 2014). These were the predecessors of the modern multinational corporations. Since World War II, the dimensions of multinational corporations have grown and spread with phenomenal speed. The international petroleum industry, however, predates this more recent development (Akanegbu, 2014).
Over the years, Multinational corporations (MNCs) have been a source of controversy ever since the East India Company developed the British taste for tea and a Chinese taste for opium (Stopford, 1998). A typical multinational corporation (MNC) normally functions with a headquarters that is based in one country, while other facilities are based in locations in other countries. In some circles, a multinational corporation is referred to as a multinational enterprise (MNE) or a transnational corporation (TNC) (Tatum, 2010). They enter host countries in different ways and different strategies. Some enter by exporting their products to test the market and to find whether their existing products can gain sizeable market share. For such firms, they rely on export agents. These foreign sales branches or assembly operations are established to save transport costs because there is a limit to what foreign exports can achieve for a firm owing mainly to tariff barriers and quotas and also owing to logistics or cost of transportation. Most of the firms are encouraged by the low wage rates and other environmental factors. To meet the growing demands in the foreign countries, the firm considers other options such as licensing or foreign direct investment which are critical steps. Some continue with export even when they have settled for the FDI option. Every step takes strategic planning and is motivated by profit through sales growth. The idea of multinational corporations has been around for centuries but in the second half of the twentieth century multinational corporations have become very important enterprises. Tatum (2010) proposes that multinationals operate in different structural models. The first and common model is for the multinational corporation positioning its executive headquarters in one nation, while production facilities are located in one or more other countries. This model often allows the company to take advantage of benefits of incorporating in a given locality, while also being able to produce goods and services in areas where the cost of production is lower (Ozoigbo and Chukuezi, 2011).
The second structural model is for a MNC to base the parent company in one nation and operate subsidiaries in other countries around the world. With this model, just about all the functions of the parent are based in the country of origin. The subsidiaries more or less function independently, outside of a few basic ties to the parent. A third approach to the setup of an MNC involves the establishment of a headquarters in one country that oversees a diverse conglomeration that stretches to many different countries and industries (Tatum 2010; Robinson 1979). With this model, the MNC includes affiliates, subsidiaries and possibly even some facilities that report directly to the headquarters. Such direct investment means the extension of the managerial control across national boundaries (Gilpin, 1987). Rugman et al (1985), who prefer to use the name multinational enterprises, say that the concept of the MNE is that “the difference between Domestic Corporation and the MNE is that the latter operates across national boundaries”. While institutions are important for economic development, particularly in resource rich countries, the interaction between multinational corporations and host country institutions is not well understood (Wiig and Kolstad, 2010).
There is a risk that multinational corporations facilitate patronage problems in resource rich countries, exacerbating the resource curse. Multinational corporations (MNCs) in service industries have given this sector's large and growing impact on the global economy (Goerzen and Makino, 2007). The Marxists view the emergence of the multinational corporations as a historically progressive aspect of capitalism in the process of developing, at international level (Gilpin 1987; Stopford 1988). In all these views both Marxist and non-Marxist, the common basis is productive activity in more than one social formation. Another point to be noted right away is that in a social formation there may be many multinationals with different nationalities and also many corporations of the same nationality. In a social formation where there are many MNCs from different nations, there are higher possibilities of conflicts than where they are mainly from the same country.
It is interesting to know that, many African (Nigeria inclusive) countries still do not allow free entry of multinational firms and often express preferences with regard to the type of FDI; unfortunately, there is little in the literature that helps to understand such policies, other than the standard argument that certain industries are able to secure greater protection for themselves than others, perhaps it may also be the case that positive spillovers to the local economy are perceived to be higher under certain types of FDI than others (Saggi, 2002). However, despite the subtle policy interventions outlined above, Saggi maintained that, when measured by a broad yardstick, overall government policy has become more liberal across the world, with intense competition for strategic trade and FDI from developed and ‘emerging nations’ by most developing countries.
Due to the perceived benefits associated with them, political and economic decisions by elected governments are increasingly made to provide favorable environments for the investment and marketing needs of multinational corporations. Consequently, multinational firms are sometimes able to influence the domestic policy outcomes of host developing countries by threatening to move jobs overseas (Abdul-Gafaru, 2006)
Nigeria has played host to multinational corporations long before independence till date. The number and activities of these multinational corporations have grown over time as Nigeria struggles to develop socio-economically as a nation. After over fifty years of nationhood, the economic growth trajectory of Nigeria is at best cheered in spite of the growing presence of these multinational corporations in its core sectors of oil, banking and manufacturing sectors (Awolusi, 2012; Onudogo, 2012).The study of Otokiti (2012) revealed that challenges faced by multinational firms during entry into the Nigerian market include government regulations and policies, geographical location, language barrier, shortage of skilled labour, and low level of technological development.
- STATEMENT OF THE PROBLEM
The nature or objective of multi-national corporation (MNCs) is maximization of profit at the lowest possible cost. Actually it is this feature that gave rise to MNCs. So the idea of investing in foreign land is not to better the lot of the host nation but to exploit as much as is possible in order to develop the home country (Ozoigbo and Chukuezi, 2011). Presently multinational corporations have dominated discussion on political economy. Activities of the MNCs in Nigeria have generated a repulsive reaction from many economic theorists like (Onimode 1982). Onimode(1982) went ahead to regard MNCs as monsters that have consistently and systematically stultified economic development in various parts of the world.
Furthermore, the clash between multinationals host countries has been most intense in the less developed economies. Individual critics and public officials have leveled vociferous charges against the policies of International Corporation and their alleged negative consequences for the economic well being and development of the host nations. (Gilpin, 1987). This view promoted the reaction of Onimode (1982) and to conclude that there is more myth than reality in the developmental activities of the MNCs in Nigeria.
- AIMS AND OBJECTIVES
The main aim of the study is the influence of Chinese multi-national company in Nigeria. Other specific objectives include:
1. to examine the influence of Chinese multi-national company in Nigeria.
2. to investigate the purpose of Chinese multi-national company in Nigeria.
3. to identify ways Chinese multi-national company in Nigeria contributes to the development of Nigeria.
4. to examine the Negative and positive Effect of Multinational Corporations in Nigeria.
5. to examine CCECC and the Nigeria railways.
1.4 RESEARCH QUESTION
1. What is the influence of Chinese multi-national company in Nigeria?
2. What is the purpose of Chinese multi-national company in Nigeria?
3. What ways does Chinese multi-national company in Nigeria contributes to the development of Nigeria?
4. What are the Negative and positive Effect of Multinational Corporations in Nigeria?
5. What is the relationship between CCECC and the Nigeria railways?
1.5 STATEMENT OF RESEARCH HYPOTHESIS
1. H0: Chinese multi-national company does not influence socio economic development in Nigeria.
2. H1: Chinese multi-national company influences socio economic development in Nigeria.
1.6 SIGNIFICANCE OF STUDY
The study will be an enlightening tool to the influence of Chinese multi-national company in Nigeria. Through this study there will be a significant improvement of multi-national corporations in Nigeria.
The study will also help the government re-structure their relationship with multi-national corporations and know what to expect from them.
Furthermore, this work will enrich construction literature by isolating in order of significance or severity and details, the factors influencing working capital management and working capital requirements of contractors in Nigeria, such that greater attention will be paid to it by Nigerian contractors and the government respectively, which will further improve indigenous content.
In addition to this, findings from the study will drive the need and importance for reduced dependence on foreign contractors. There is also the challenge of escalating cost of construction which has become common place, especially on most Nigerian public projects. This is as a result of the huge allowances made for profits and overheads by foreign contractors in their contract bids.
Lastly, the study will serve as a research tool to the other researchers for further study.
1.7 SCOPE OF STUDY
The scope of study will cover influence of Chinese multi-national company in Nigeria (a case study of CCECC Nigeria Railway Company limited)
1.8 LIMITATION OF STUDY
1. Financial constraint- Insufficient fund tends to impede the efficiency of the researcher in sourcing for the relevant materials, literature or information and in the process of data collection (internet, questionnaire and interview).
2. Time constraint- The researcher will simultaneously engage in this study with other academic work. This consequently will cut down on the time devoted for the research work.
1.9 DEFINITION OF TERMS
Influence: the capacity to have an effect on the character, development, or behaviour of someone or something, or the effect itself.
Multi-national company: A multinational corporation is a corporate organization that owns or controls production of goods or services in at least one country other than its home country
CCECC: china Civil Engineering Construction Group Limited [Liability] Company
Railway: a track made of steel rails along which trains run.
