ABSTRACT
The study examines the impact of the multinational corporations on the economy of Democratic Republic of Congo.
The secondary data was used to reflect the purpose of the study, content analysis was used to elicit data from texts, journals, magazines, past project relating to this study, archives, publications of research work and internets.
The study revealed that: activities of multinational corporations in Democratic Republic of Congo includes economic transformation, employment creation and technology transfer; multinational corporations also supported violence and crisis in DRC.
The study concluded that impact of the multinational corporations has positive impact on the economy of Democratic Republic of Congo. The study further recommended that; Representative of all stakeholders-employees, customers, society, government should be appointed as members of the Board of Directors of various corporations, for direct representation and participation in the decision- making process; The polycentric model of staff selection should be imposed by government on these corporations which will be enshrined under her terms of agreement with the multinational corporations operating in DRC; There should be interactive sessions on regular basis between the Multinational corporations and leaders of DRC to proliferate understanding and enhance harmonious business relationship especially on moral and Ethical ground; Discrimination in employment policies and salaries of workers should be ruled out and adoption of polycentric and geocentric approach to staff selection should be encouraged to benefit our citizenry; A technology policy transfer should be formulated which will be binding on any company wishing to do business in DRC.
CHAPTER ONE
INTRODUCTION
Background to the Study
The main players in a global economy are multinational corporations (MNCs) due to their international and intercontinental activities and contributions to their host nations. Multinational Corporations are corporate organizations that operate in more than one country other than home country. Multinational Companies (MNCs) have their central head office in the home country and secondary offices, facilities, factories, industries, and other such assets in other countries. The Dutch East India Company was the first multinational corporation in the world and the first company to issue stock as well as the world’s first super corporation with the possession of quasi-governmental powers such as the ability to wage war, negotiate treaties, coin money and establish colonies.1
Multinational Corporations (MNCs) are firms that own and control their production facilities in two or more countries. They produce and distribute goods and services across national boundaries; they spread ideas, tastes, and technology throughout the world; and they plan their operations on a global scale. 2 Such companies have offices and/or factories in different countries and usually have a centralized head office where they coordinate global management. Nearly all major multinational corporations are American, Japanese or Western European, such as Nike, Coca-Cola, Wal-Mart, AOL, Toshiba, Honda, BMW, Epcos, A&M Minerals and Metals, Sogem, Vodacom Group, Heineken, Nestle, orange, Trust Merchant Bank, Sanofi, Ericsson, BhartiAirtel, Mott Macdonald and Huawei Technologies among others.
Multinational Corporations are usually very large corporate entities to an extent that they have their base of operations in one nation known as the “home nation” while they carries out and conducts business in at least one or more other nations, which are usually referred to as “host nations.3 Multinational corporations (MNCs) have also created diverse advantages which can be put to the service of world development. Their ability to help reduce poverty, drive economic growth, create jobs that utilize local people, boost economic development by transferring technology and knowledge, build up infrastructure as well as raise people’s standard of living among others have proven to be outstanding.
The Democratic Republic of Congo, is a country in Central Africa. It was formerly called Zaire (1971–1997). It is, by area, the largest country in sub-Saharan Africa, the second-largest in all of Africa (after Algeria), and the 11th-largest in the world. With a population of over 101 million, the Democratic Republic of the Congo is the fourth-most populous in Africa, and the 15th-most-populous country in the world. 4
The country has massive endowment in natural resources, including minerals, oil, water, forestry and agricultural land. The DRC is a world-leading producer of copper and cobalt, and it also produces large amounts of coltan (columbite-tantalite), diamonds, silver and petroleum. According to the most recent estimates, the DRC accounts for 55 percent of the world’s cobalt production with 45 percent of world’s reserves, 21 percent of industrial diamonds, and 12 percent of tantalum. The mining and processing of minerals represent a substantial share of total domestic production of (11.5 percent in 2012); the sector has been the main driver of the recent growth acceleration. While minerals and oil generate the most attention, other sources are equally important. The DRC is also blessed with land that is fertile due to the abundant rains on the entire territory and the volcanic soils in the eastern and northern parts of the country. In addition to providing a stable basis for food security, agriculture also constitutes a potential springboard for industrialization to the extent that adequate investments in infrastructure and technological innovation are undertaken as part of a coherent national industrialization and growth strategy.5
The mining sector has been one of the main sources of economic growth in recent years, according to official documents. However, mining as a livelihood in DRC can be essentially divided into two different domains: formal, large-scale industrial mining mainly in Katanga, and informal, small-scale artisanal mining in the Kivus, Maniema, Province Oriental and the Kasais.
The Democratic Republic of Congo (DRC) as a developing country has played host to multinational corporations (MNCs) before its independence in June 1960 till date. The number and activities of these multinational corporations (MNCs) have grown over time as Democratic Republic of Congo (DRC) tries to enlarge its economy. The European countries needed a market for surplus products and place to access cheap raw materials and labor. Africa most especially Democratic Republic of Congo (DRC) is the destination and since then determined the Democratic Republic of Congo’s (DRC) economy after her independence.
While MNCs have been credited with the contributing to the economic development of some nations, they have also been criticized for facilitating the economic backwardness of some developing nations due to their activities and their desire to control the resource in the host country needed for production such as copper and cobalt, coltan (columbite-tantalite), diamonds, silver and petroleum among others. Economic development in this sense can be said to be the focus of federal, state, and local governments to improve standard of living through the creation of jobs, the support of innovation and new ideas, the creation of higher wealth, and the creation of an overall better quality of life. While economic backwardness is a lack of progress by a country’s economy to some perceived cultural norm of advancement. 6 The imperative to control resources and know-how as well as to secure access to overseas markets has driven some firms to engage in Foreign Direct Investments and gradually or potentially to become Multinational Corporations (MNCs).
In the twenty-first century, Multinational Corporation (MNC) has become the essential institution of developing countries. A significant number of multinational corporations (MNCs) started their operations in developing countries by the 1990s. The effects of their operations in developing countries are now quite different from that was done in the past. Multinational corporations (MNCs) benefit from the lower labor costs, lower tax rates or tax exemptions and grants given by the government of developing nations so as to attract them into the countries, some of which were given to them between some particular periods.
However, the MNCs are exploitative of natural resources found in developing countries such as DRC. Resources meant for its developmental goals are not productively utilized due to de-capitalization of the economy in form of profit repatriation. In addition, some MNCs have also operated “sweatshop” industries, damaged physical environments, sold torture devices and firearms to dictators, bribed officials to look the other way when laws are broken, complicity in human rights abuses, cheated local governments out of tax revenues with “double accounting” practices, stifling of infant industries autonomy and supported repressive governments that control local labor for the benefit of the MNCs. 7
This study therefore, sets out to critically examine the impacts of multinational corporations (MNCs) on the economic development or backwardness in Democratic Republic of Congo (DRC).
Statement of the Problem
The Democratic Republic of Congo is potentially one of the richest counties on earth, but colonialism, slavery, corruption and now imperialism have turned it into one of the poorest. The economy of the Democratic Republic of Congo has declined severely since the mid-1980s with over 85 percent of the people living in severe poverty and 80 percent of households reportedly unable to meet basic needs while almost 75 percent of the total population is malnourished. 8
With the number of MNCs in DRC, there should be a high level of economic development in relation to their abundant natural and human resource in the country. The existence of MNCs, which could have increase the creation of job, improve standard of living, engaged in social responsibility services and improved the country’s GDP and so on. However, the country is experiencing great downward in terms of measures of economic development, Gross Domestic Product (GDP), Human Development Index (HDI) Foreign Direct Investment, Human Resources, Industrialization, Technological Infrastructure, among others. Although MNCs have become ubiquitous globally, there has always been an uncertainty about their positivity and negativity. 9
The ideal situation is that MNCs’ presence in any country is a source of foreign investment and it brings progress and development to any country in which they exist. The reality in Congo is the reverse. It is essential to examine the impacts of the multinational corporations on the economy of Democratic Republic of Congo in order to determine the reason why the reality in Congo situation precedes over the ideal.
Aim & Objectives of the Study
The main aim of the study is to evaluate the impact of the multinational corporations on the economy of Democratic Republic of Congo.
- Examine the concept of Multinational Corporations.
- Highlight the activities of multinational corporations in Democratic Republic of Congo.
- Identify the positive impact of multinational corporations on Democratic Republic of Congo.
- Explore the negative impact of multinational corporations on Democratic Republic of Congo.
- Recommend ways of reducing the negative effects of multinational corporations on the economy of Democratic Republic of Congo.
Significance of the Study
This study is significant because there is a proliferation of MNCs in DRC yet the level of development in the country is low. This study will bring to fore the activities of MNCs in DRC thereby shedding light on the positive and negative impact of MNCs on the development of the country. This will be significant because there is a dearth of literature on the specific impact of MNCs in DRC. This study will therefore contribute to the information resource on the activities of MNCs in DRC. Findings from this study will help countries most especially the developing countries to recognize the positive as well as negative impact of MNCs which are dominant in some countries in several ways such as; environmental degradation, exploitation of natural resources as well as corruption and abuse of human rights.
This study will be relevant to African policy makers as it will recommend strategies that can be employed in mitigating the negative impact of MNCs in DRC and Africa at large. The findings of the research can be employed to ensure peaceful human rights campaigns as the study recommendation will help to examine method to seek reparation for the wrong done by the MNCs in Congo. The study will also be useful to sociologists, economists, political science and history students as well as researchers especially experts in international relations and organization. This work will also serve as a research material for use as future reference on issues surrounding the activities of MNCs in DRC
Research Methodology
Secondary sources will be used for this research. Relevant secondary data will be collected from several sources including relevant books, journals, government reports, newspapers, and websites. Data will also be obtained from The Nigerian Institute of International Affairs among others.
Scope of the Study
The scope of this work will cover three MNCs in Democratic Republic of Congo so as to highlight the overall implications of MNCs in DRC. Democratic Republic of Congo was selected as the case study for this research because there are already shown evidences of economic backwardness in spite of the presence of a number of MNCs in Country. The research covers a period from 1999 to 2019. This is because the Second Congo War (the world most deadly war after the Second World War by Wikipedia) causes the greatest economical downfall in Congo in 1999 and the same year mark the beginning of the end of the war which last till 2003. Hence, the study will analyze MNC activities since 1999 till 2019.
Literature Review
The necessity of the review of related literature is to determine the extent of works done on the area of study as well as what the present study can, benefit, and the loopholes. Research work is incomplete without having an insight and understanding of related information or knowledge in literature relevant to the study. Knowledge of the existing related works will give the researcher a better insight into the problem area. The researcher will not only be equipped with information on what has been known but also what is yet to be fully understood, reconstructed or the unknown. It is on the above statement that one can consider the content and nature of related publications in order to know its efficiency and effectiveness towards the reconstruction of the roles of multinational corporations on the economic development or backwardness in Democratic Republic of Congo.
Makhura B. Rapanyane and Kgothatso B. Shai’s study titled China's Multinational Corporations in the Democratic Republic of Congo's Mining Industry: an Afrocentric Critique. This study claims that China's entrance in Africa in the early 2000s through the China–Africa Cooperation has apparently signaled several mutual beneficial agreements. However, there is a view that Asian tiger's (China) arrival on the African soil was driven by its national interests. Such interests were particularly in the continent's rich mineral resources, which are deemed significant for its own economic boom. This observation reflects that scholars have not understood China's engagement with Africa. Therefore, this paper cites what is often cited as the second “scramble for Africa” within the context of the Democratic Republic of Congo (DRC). It argues that Chinese mining companies' operations in DRC are no different to the early colonial masters who only came to Africa for nothing else but mineral resources in order to develop their own nations at the expense of Africa's own development. Based on Afro-centricity as the alternative theoretical lens, this paper seeks to critique the involvement of Chinese Multinational Corporations in the mineral resources complex of DRC. Methodically, this paper relies on document review and analysis in its broadest sense. The paper only examines the impact of China’s MNCs in Congo without considering other MNCs from other countries.10
In a journal article written by Mwamayi, Wood, Haines and M. Brookes titled Exploration of the Democratic Republic of Congo (DRC) textile industry survival: Case of La Société Textile de Kisangani (SOTEXKI) claim that the Democratic Republic of Congo’s (DRC) textile and clothing firms have been facing multiple challenges of competitiveness. During the last past ten years the industry has dramatically declined and the only still existing firm has managed to secure its survival by concentrating on niche markets. The situation is principally due to infrastructural challenges, second hand products, institutional instability, illegal imports from the East Asian countries and other internal problem. Here, special attention is given to La Société Textile de Kisangani (SOTEXKI), the only survival company in the DRC textile and clothing industry. This journal explores the reasons why this survival company in the DRC textile industry continuously copes with these low cost competitions by looking at what works in the industry, why and what can be done to make things work better? It proposes to look at the different production patterns by exploring their effectiveness to promote the textile industry’s survival and competitiveness. It then discusses some of the findings about this survival company in the DRC textile industry. Further results indicated that SOTEXKI is an integrated industry with forward and backward linkages that focuses on value added production and keeps complying. The present study tends to examine the impact of MNCs in Congo as this article only explored the Democratic Republic of Congo (DRC) textile industry survival: Case of La Société Textile de Kisangani (SOTEXKI). 11
Also the book edited by Eric Rugraff and Michael W. Hansen titled Multinational Corporations and Local Firms in Emerging Economies opines that, it is increasingly recognized by policymakers as well as academics around the world that close direct and indirect interaction between multinational corporations (MNCs) and local firms is absolutely essential if foreign direct investment (FDI) is to have deep and lasting positive effects on host countries. Nevertheless, the issue of MNC-local firm interaction has been relatively underexplored in the academic literature until recently, where we have seen the emergence of a growing literature focusing on linkages and spillovers from FDI. This book did not focus on the activities of MNCs in Congo which the main focus of the present study. 12
Egu, E. Mathew and Aregbeshola, R. Adewale article known as The odyssey of South African multinational corporations (MNCs) and their impact on the Southern African development community (SADC) observes that the pressures of globalization and the lure for increased profitability have continued to motivate South African multinational companies (MNCs) to invest across international borders, especially in the Southern African Development Community (SADC). Furthermore, the policy to integrate the region has necessitated most of the governments of the SADC to encourage their largest companies to invest within the region, in order to tap from improved incentives created by regional economic integration. The main results from this article shows that the dataset collected from various econometric estimations between 1980 and 2011 implied that South African MNCs contributed positively to regional economic development and investment in SADC and on a larger scale, the region. Similarly, the findings of this study also indicate that South Africa-originated MNCs operation within the region triggers the growth of the cumulative GDP. This article only focuses on Southern African Development Community (SADC). 13
J. Eluka, Ndubuisi-Okolo Purity Uzoamaka and Anekwe Rita Ifeoma research known as Multinational Corporations and Their Effects on Nigerian Economy. This work is anchored on multinational corporations and their effects on Nigerian economy. The study was necessitated by the negative impacts of these corporations on our economy which have hampered economic growth. Three theories were reviewed to explore the ills of these multinational corporations in Nigeria namely; New Trade Theory, Dependency Theory and Unequal exchange theory. The findings revealed that Multinational corporations had done more harm than good on Nigerian economy in terms of profit repatriation, environmental degradation, human rights violation, nontechnology transfer, bribery and corruption etc. That most of these corporations are imperialist and parasitic in nature. It was concluded that since these businesses are component of the society, they must subject themselves to the fair requirements of the society since they raise huge capital from their operations in the society. It was also recommended that representative of all stakeholders-employees, customers, society, government should be appointed as members of the Board of Directors of various corporations, for direct representation and participation in the decision making process. This great work focuses on the impact of MNCs on Nigeria economy while the present study tends to write on the impact of MNCs on DRC. 14
The research of ShameemaFerdausy and SahidurRahman titled Impact of Multinational Corporations on Developing Countries sees multinational corporations (MNCs) are enterprises which have operations in more than one country. They manage production establishments or deliver services in at least two countries. MNCs conduct a significant proportion of their operation in other countries. Therefore, they can have influence on other countries economic entire environment. The controversies whether MNCs help or harm development especially of developing countries have been examined in this paper. Accordingly, three case studies are presented that make evident the positive, negative, and mixed impacts of multinational corporations on developing countries. The researchers focus on impact of multinational corporations on developing countries without a particular country as a center focus.15
NtamBaharanyi, Lila B Karki and Md. Mutaleb report on “Democratic Republic of the Congo: AET Background Study”. This report was prepared in preparation for a scoping assessment of the vocational training in the DRC conducted by the Innovation for Agricultural Training and Education (InnovATE) project team during August 2014. The purpose of the scoping visit was to assess the current state of agricultural education and training (AET) and technical and vocational education and training (TVET) with the goal of identifying key opportunities for building human and institutional capacity for the agricultural workforce in DRC. This report is the first step in the InnovATE methodology that will link long-term AET human and institutional capacity development (HICD) with short-term agricultural value on economic growth. This work is on the agricultural resources in Congo but the present research will focus on impact of MNCs in Congo. 16
Chris Alden and Martyn Davies in an article titled “A Profile of the Operations of Chinese Multinationals in Africa” claims that the presence of Chinese multinational corporations (MNCs) on the global stage is changing the landscape of international business and politics. Western firms, which once had virtually undisputed command over international financial resources and the political ties to dominate global business, are now being challenged by a host of emerging country corporations, with China being at the forefront. Highly competitive and strongly supported by the state, Chinese corporations are embarking on an acquisition drive that is capturing key resources and market share across the developing world. In many respects it is Africa, an area rich in natural resources and under-exploited markets and with only limited historical ties to China, which is serving as a proving ground for the new Chinese MNC. The present study aim at examining the impacts of selected MNCs on Congo rather than only Chinese MNCs. 17
Elisa Giuliani article titled Multinational Corporations, Technology Spillovers and Human Rights’ Impacts on Developing Countries. This paper stems from the recognition that, in the current globalized world, the achievement of economic development goals is not necessarily accompanied by improved social conditions, or respect of people’s human rights more generally. Through their internal resources and capabilities, which often exceed those of many developing countries, Multinational Corporations (MNCs) can either positively or negatively condition their route towards development. To date, no scholarly research has analyzed the positive or negative effects of MNCs on host developing countries, by looking jointly at economic and human rights’ impacts. This project is a first attempt to take into account and integrate evidence coming from two distinct streams of literature. The researchers focus on impact of multinational corporations on developing countries without a particular country as a center focus.18
Johannes Herderschee, Kai-Alexander Kaiser and Daniel Mukoko Samba research titled Resilience of an African Giant: Boosting Growth and Development in the Democratic Republic of Congo, was sponsored by The International Bank for Reconstruction and Development/the World Bank. This book pulls together an impressive body of research on the exemplary transition of a country from a state of conflict to a post conflict situation, and from there toward becoming a country with legitimate institutions created by free, democratic, and transparent elections. The detailed analysis of administrative, political, and economic governance over the past 20 years facilitates a better understanding of the context and the fragile situations faced by the Democratic Republic of Congo. Without deferring the Government in any way, the authors highlight the failures and successes amassed on the development front. It offers the opportunity to begin thoughtful discussions about the policies to be adopted in order to achieve the development outcomes that are much anticipated by the Congolese people. Therefore, the present study aim at examining the impacts of selected MNCs on Congo. 19
Odunlami Samuel Abimbola, AwolusiOlawumi Dele’s article titled Multinational Corporations and Economic Development in Nigeria determines the extent to which multinational firms have spurred up economic development in Nigeria. Multinational Corporations (MNCs) are those having operations in more than one country. They are subjects to changes in international exchange rates, tariffs, duties, and restrictions on trade. The most successful ones have established production points where labor is cheap, and secures affordable transportation to deliver to their markets. The study used scholarly journals, articles, and textbooks to review the activities of multinational firms in DRC’s economic development, in relation to growth and development, technology transfers and policy issues. Specifically, the gap in technology intensities from MNCs in Nigeria seemed to be widening despite the recent comparative improvement in Foreign Direct Investment (FDI) inflow into the country. Consequently, there is urgent need to upgrade learning and capabilities of the local firms in the country, through the formulation of strategic FDI and technology transfer policies to safeguard the possible negative impact of the declining FDI inflow from MNCs. However, to further attract foreign investors, Nigeria should strengthen and broaden policies to facilitate cost effectiveness by reducing tariffs on imported inputs, as well as, improvement in telecommunications and transportation infrastructures. Furthermore, since this study highlighted some of the benefits, linkages and relationship between MNCs and economic development; this may give Nigerian policy makers some helpful facts to bring to the negotiating table. The present study aims at examining the impacts of selected MNCs on Congo rather than MNCs in Nigeria. 20
