Third and final in a series by Beatrice Halbach (LBJ MPAff Student) covering her internship at OECD.
We often talk about the rise of globalization as a game-changer in the field of international development: as information technologies continue to advance, trade flows have greatly expanded while national economies have become highly interdependent. This phenomenon has generated a multitude of complex and mixed effects. In a number of countries, the proliferation of cheap, accessible technologies through interconnected global markets is spurring rapid economic investment and growth; while, in others, this same force is actively limiting the competitiveness of national economies whose governments are less capable of mobilizing to take advantage of new opportunities, thereby counteracting some of the negative effects of globalization. While development experts, national governments, and international NGOs often go to great lengths to highlight the asymmetric effects of globalization on the developing world, they rarely consider the transformative role trans-national corporations (TNCs) can play in developing countries’ economic development.
In the past, TNCs have been criticized for their exploitative practices in developing countries, with critics citing the exploitation of cheap labor the degradation of environmental resources, and rampant government corruption as examples. Today, however, many modern TNCs have developed and implemented corporate social responsibility policies in response to mounting international pressure. It has also been widely recognized that TNCs generate numerous social benefits for the developing countries in which they do business such as spearheading increases in productivity, fostering greater trade with the host country, and prompting overall economic modernization. TNCs influence development particularly through their roles in building both human and physical capital and in strengthening the flows of global trade in developing countries. As commentators have pointed out, foreign direct investment (FDI) provided by TNCs encourages the flow of needed resources to the developing countries who need them. In addition, the local taxes paid by TNCs provide the financial resources necessary for governments to take proactive steps to increase access to basic services and infrastructure in their country. TNCs also play a vital role in laying the foundation for technological development and industrial growth by serving as examples to domestic companies and government subcontractors, helping diffuse new technology and business “know-how”. Due to the dearth of skilled labor that is characteristic of many developing countries, TNCs are often involved in local capacity-building efforts through education initiatives and job training.
The Facebook-led initiative Internet.org highlights the potential for TNCs to significantly influence international economic development in the 21st century. In August of 2013, Facebook CEO Mark Zuckerberg, alongside six other major telecommunications companies, founded the project in an effort to increase Internet access and affordability for underserved populations around the world. Pilot programs have involved successful partnerships with mobile operators in Paraguay and the Philippines, working together to develop business plans that decrease connectivity costs, grow the number of Internet users in their home country, and generally make services more efficient for everyone. Facebook is also investing in developing a variety of other technologies that will further help the world tear down barriers to connectivity and Internet access. In July 2015, it finished the first full-scale model of Aquila, a high-endurance, high-altitude solar-powered drone that “beams” communications signals from the air to enable Wi-Fi or LTE connection on smart phones and other devices.
Although the technology is still in its early phases, it has the potential to significantly reduce costs and increase connectivity in remote areas with poor infrastructure and a lack of investment by private service providers. However, as Yael Maguire, the head of Facebook’s Connectivity Lab, points out, even if the technology is developed, regulatory issues regarding radio frequency and the approval process for flying in international airspace will prove to be the greatest obstacles for Internet.org. National governments have an important role to play both in fostering the success of such initiatives and ensuring that they benefit the entirety of their population in an equitable manner.
Nonetheless, the governments of many developing countries fail to recognize the potential transformative nature of TNCs in today’s global market, thereby neglecting to incorporate public-private coordination and partnerships into development strategies. Without an explicit focus on increasing coordination with these important private actors, governments run the risk of missing major opportunities for innovation and modernization.
Edited by Danny Khalil