Multinational corporations and the Third World: the case of Japan and Southeast Asia

The dramatic transformation of the climate surrounding relations between rich and poor nations since the OPEC oil embargo in 1973 has raised new hopes that MNCs may be made to energize development in the Third World. Improved information about the vulnerability of the rich nations and about techniques for dealing with MNCs, some writers argue, will enable underdeveloped countries to ensure that foreign investment serves as an “engine of development.” This view exaggerates the strengths of Third World states. A lack of information about opportunities and techniques is a small part of the burden which underdevelopment imposes on poor countries in their dealings with MNCs. A case study of Japanese MNCs in Southeast Asia raises doubts concerning the likelihood that the poor countries will be able to harness MNCs for their development. Southeast Asia's growing dependence on Japan in the fields of trade, official development aid, and private investment tends to impose constraints on efforts to influence the behavior of MNCs. A more basic problem resides in the “softness” of underdeveloped states, which renders ineffectual regulations intended to control MNCs. Because MNCs in certain important respects inhibit the process of building viable indigenous institutions and even contribute to the perpetuation of soft states, they may do more to impede than to stimulate development, at least in the softer Third World states. It may well be that more serious attention should be paid to studies of how Third World states might develop if the role of MNCs were circumscribed.