- What is Globalization?
- What are MNCs?
- What is Foreign Direct Investment?
- Steps to Attract Foreign Investment.
- Factors that enabled globalization.
- What is WTO?
1. What is Globalization?
- Globalization is this process of rapid integration or interconnection between countries.
- Foreign trade thus results in connecting the markets or integration of markets in different countries.
- More and more goods and services, investments, and technology are moving between countries.
- The goods and services are produced globally.
2. What are MNCs
- MNC stands for Multinational companies.
- In general, MNCs set up production where it is close to the markets; where there is skilled and unskilled labour available at low costs; and where the availability of other factors of production is assured.
- In addition, MNCs might look for government policies.
- China provides the advantage of being a cheap manufacturing location.
- Mexico and Eastern Europe are useful for their closeness to the markets in the US and Europe.
- India has highly skilled engineers who can understand the technical aspects of production.
- It also has educated English-speaking youth who can provide customer care services.
3. What is Foreign Direct Investment?
- An investment made by MNCs is called foreign investment.
- Foreign Direct Investments are commonly made in open economies that have skilled workforce and growth prospects.
- FDIs not only bring money with them but also skills, technology, and knowledge.
4. Steps to Attract Foreign Investment.
- In recent years, the central and state governments in India are taking special steps to attract foreign companies to invest in India.
- Industrial zones, called Special Economic Zones (SEZs), are being set up.
- SEZs are to have world-class facilities: electricity, water, roads, transport, storage, recreational and educational facilities.
- Companies that set up production units in the SEZs do not have to pay taxes for an initial period of five years.
- The government has also allowed flexibility in the labour laws to attract foreign investment.
5. Factors that enabled globalization.
- Rapid improvement in technology has been one major factor of globalization.
- For instance, the past fifty years have seen several improvements in transportation technology.
- This has made much faster delivery of goods across long distances possible at lower costs.
- Even more remarkable have been the developments in information and communication technology.
- In recent times, technology in the areas of telecommunications, computers, Internet has been changing rapidly. Telecommunication facilities (telephone including mobile phones, fax) are used to contact one another around the world, to access information instantly, and to communicate from remote areas.
- This has been facilitated by satellite communication devices. As you would be aware, computers have now entered almost every field of activity.
- You might have also ventured into the amazing world of the internet, where you can obtain and share information on almost anything you want to know.
- The Internet also allows us to send instant electronic mail (e-mail) and talk (voice-mail) across the world at negligible costs.
Using IT in Globalization
- A news magazine published for London readers is to be designed and printed in Delhi.
- The text of the magazine is sent be email through the Internet to the Delhi office.
- The designers in the Delhi office get orders from London to design the magazine using telecommunication facilities.
- The design is done on a computer.
- After printing, the magazines are sent by air to London.
- Even the payment of money for designing and printing from a bank in London to a bank in Delhi is done instantly through the Internet (e-banking)!
6. What is WTO
- We have seen that the liberalization of foreign trade and investment in India was supported by some very powerful international organizations.
- These organizations say that all barriers to foreign trade and investment are harmful. There should be no barriers.
- Trade between countries should be ‘free’.
- All countries in the world should liberalize their policies.
- World Trade Organisation (WTO) is one such organization whose aim is to liberalize international trade.
- Starting at the initiative of the developed countries, WTO establishes rules regarding international trade and sees that these rules are obeyed.
- At present 164 countries of the world are currently members of the WTO.
- Though WTO is supposed to allow free trade for all, in practice, it is seen that the developed countries have
- unfairly retained trade barriers.
- On the other hand, WTO rules have forced developing countries to remove trade barriers.
- An example of this is the current debate on trade in agricultural products.