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ON SOME PROBLEMS OF THE TRANSNATIONAL COMPANIES IN THE ECONOMY AND POLITICS OF THE SOUTH CAUCASUS COUNTRIES
Manvelidze Rezo, Doctor of Economics, Full Professor
Manvelidze Irakli, Doctor of Social Sciences, Associate Professor
Batumi Shota Rustaveli State University
The study of the present paper is the transnational companies and Transcaucasian countries, and the subject of investigation - the regions potential and its place in the transnational integration and, on this basis, the impact of TNCs (transnational companies) on the economies and politics of the region. The purpose of the study: the first - the study of problems of the group, which impede the activities of TNCs in this region, the second - to study the current level of provision and show trends, and the third - the definition of models prospects of change in the existing situation today. These three aspects are mutual determinative. Delivered to the fore the problem of legal regulation of transnational corporations, the nature of their activity, scale, shape, characteristic of the Caucasian countries, the analysis of common features and peculiarities.
Based on the objectives of the study, its main objectives are: separation stages in the development of transnational capital, consideration of the formation and modeling of organizational and economic activities of transnational organizations; showing typology of monopolistic groups, the impact of transnational associations in international political processes and show the positive and negative aspects of their activities; consideration of the interrelated issues of transnational corporations and states, to study the influence of transnational corporations on economic and political cooperation among the countries of Transcaucasia, related to energy, the implementation of TNC investment in energy, as well as analysis of transnational projects, taking into account aspects of international security, show the picture of TNCs Transcaucasian region.
Key Words: transnational companies, Transcaucasian region, global economy, political processes, the process of globalization, the world market, the world economic organizations.
Исследованием представленной статьи является транснациональные компании и страны Закавказского региона, а предметом исследования - потенциал региона и его место в транснациональной интеграции и, исходя из этого, влияние ТНК (транснациональные компании) на экономику и политику стран региона. Цель исследования: первое - изучение проблем той группы, которые препятствуют деятельности ТНК в странах данного региона; второе – изучение современного уровня положения и показ тенденций; третье – определение моделей перспектив, их изменение в существующем на сегодня положении. Эти три аспекта взаимоопределены. На передний план поставлены проблемы деятельности правового регулирования транснациональных компаний, характер их деятельности, масштаб, формы, характерные для стран Закавказья, анализ общих черт и специфика.
Исходя из целей статьи, его главными задачами являются: выделение этапов развития транснационального капитала; рассмотрение формирования и моделирования организационно-экономической деятельности транснациональных объединений; показ типологии монополистических групп; влияние транснациональных объединений на международные политические процессы и показ положительных и отрицательных сторон их деятельности; рассмотрение взаимозависимых проблем транснациональных корпораций и государств; изучение влияния транснациональных корпораций на экономическое и политическое сотрудничество стран Закавказья, связанное с энергоносителями; осуществленные ТНК инвестиции в сфере энергетики, а также анализ транснациональных проектов, с учетом аспектов международной безопасности; показ общей картины деятельности ТНК Закавказского региона.
Ключевые слова: транснациональные компании, Закавказский регион, мировая экономика, политические процессы, процесс глобализации, мировой рынок, мировые экономические организации.
As is generally known, in today's global world, transnational corporations (TNCs) are becoming more active. The study of the phenomenon of TNC is one of the important problems in economic and political sciences. In today's global economy there is no significant processes that would be carried out without the intervention of multinational corporations. They serve as institutions that are shaping the present and future of the world, take the main and most important part in world political and economic processes and in individual countries.
It is known for us, that under the definition of TNC refers to entities (financial and industrial associations), which dominates the production and service sectors are based in countries or abroad, have a wide network of branches in remote countries, as well as play a leading role in the production and sale of the or other products (Transnational…, 1993:124).
The role and place of transnational organizations in the ongoing global processes of globalization significantly increases. The activities of transnational associations deepen the process of globalization. Globalization has spread to all spheres of life: economic, social, political, cultural, and global socio-economic and political geography. Globalization - an objective, logical process, which is an irreversible result of global economic evolution.
The formation of the world market, world systems of capitalism and the dominance of these transnational associations, was the impetus for the formation of nation states as participants in economic processes in the theory of "disappearance". According to this theory, in terms of growth of giant corporations, "the role of nation-states as economic units, throws down" (Giroud, 2003:75); "The world's economic future lies in the hands of large corporations that carry out global integration" (Giroud, 2003:155). The culmination of these processes should be "the creation of the world economic organizations under the umbrella of large corporations" (Giroud, 2003:159).
Chapter I – Transnational Companies and the Global Economy and Policy
It is known, that transnational corporation is a firm which control and organize production using plants from at least two countries (Grazia, 2005:204). There are two elements that support the development of the multinational corporations’ activity: technological changes and the change of the national policies about multinational corporations. The technological changes allow a facile organization and low costs for productive activities of the world scale. The change of the national policies about multinational corporations is greater in developing countries. The activity of multinational corporations supports economic globalization. But their impact on developing economies isn’t a positive every time. Transnational corporations deals with economic efficiency and exploit the scale economies. As a result, their branches migrate from those countries which have strict regulations about corporations to other countries with a permissive legislation. In order to break this process, the developing countries are forced to reduce the restrictions for multinational corporations connected with taxes, labor and environment protection.
Some specialists consider that multinational corporations operate only in those countries in which the labor rights are not guarantied. The result of this process is a failure of the national policy, which is obliged to adopt concepts imposed by international corporations. Sometimes, the developing countries can lose their capacity to protect intern life of the society (John, 2008:94). Nowadays, the elements which support the placement of the multinational corporations in a country are: market expansion, consumption zones proximity, following competition and decrease of costs. In world economy, we can assist to a race for decreasing restrictions of the developing countries against multinational corporations, in order to obtain advantages for their citizens as a result of branches’ place to their national territory. More, we talk about a race to the bottom, which means progressive migration of the capitals and technologies from countries with high levels of wages and regulations to other countries with regulations which are more favorable for multinational corporations. But for many developing countries, multinational corporations represent the lowest bad thing which they can select. For these countries, the multinational corporations create new jobs, develop infrastructure and stimulate the demand growth.
We can understand that multinational corporations try to implement new higher international standards. More, these corporations are able to impose themselves “some regulations in order to avoid greater restrictions from the governments in those countries in which they operate. Multinational corporations exploit host countries and their inhabitants because they capitalize all revenues which are obtained from a location, they migrate in other country which offer greater advantages for multinational corporations and because these corporations follow only their own interests” (Rajneesh Narula, 1999:209).
Practically, transnational corporations will never be the promoters of global justice but they can be forced to change their standards in order to ensure world progress. We can conclude that our world is not able to develop itself without transnational corporations’ support. Transnational corporations have the most important trade transactions and sells. They become an important pole of power for economic world.
Chapter II – Problems of the Transnational Companies in the Economy and Politics of the South Caucasus Countries
As is known, "The global effect" of technological advances in communications and transportation contributes to the economic activities of transnational organizations. Supply system of internal and external TNK was an international network. TNK International combine trade and capital flows, make good use of the international division of labor on a global scale, which in different countries have separate complex units and parts production, and eventually one of them (countries) produce a final product. TNK - a new "global entity", which is the size of its financial, economic and technological capacity ahead of some small states. TNCs are actively involved in the world process of globalization through the joint production of exports or foreign direct investment.
TNCs have altered the world economy into international production, which provides development and production of all its areas: the technical level and product quality, production efficiency, perfection of form of management, production management. They operate through their foster and affiliates in many countries, a unified scientific and operational and financial strategy, form it, "trusts the brain" (Fran?ois Chesnais & Grazia Ietto-Gillies, 2000:47-48), which have a large research and production and market potential, which is secured by high level of development.
At the turn of XX-XXI centuries becomes essential unprecedented activity of foreign economic activity (international economic transactions) in which TNCs act as merchants (traders), investors, suppliers of advanced technologies that promote international labor migration. TNK determine the level of international competitiveness is not a factor in the dynamics and structure, the movement of international capital and technology transfer (innovations). They play a leading role in the internationalization of production, which takes into widespread production systems in different countries.
An important feature of the phenomenon of TNCs is that in a country of their work contributes to the restructuring of local (interstate, regional) international economic relations in global relations. This process is particularly beneficial for the economy of the countries that own hard turn into active international economic processes.
At the present stage in the economies of the region’s growing number of TNCs, economic potential and the ability to influence them in different areas. TNCs play a significant role in the economy of the region en-page, an increase the level of integration of the Trans-Caucasian countries into the global economy. At the present stage, in the absence of relevant information, it is difficult to analyze the geographical scope of the operations of TNCs in the region's economies, the share of foreign transactions in total transactions, foreign assets, size of companies, share of employment of foreigners, the image of the configuration of the long-term orientation of firms, analysis of corporate active and functional strategies. All this clearly indicates that at the state level or the private sector at the regional level, should be created in the Transcaucasian countries, coordinated operating centers of foreign investment for regional government and public companies to be so called, information on camps data collection and analysis that will provide the knowledge and communication between companies. They also provide an opportunity for multinational companies of the opportunities in the region, development priorities. Conduct research to identify existing problems and, consequently, will develop recommendations aimed at government agencies that require improved information infrastructure and information technology.
We believe that after the irreversible process of globalization will review the region's economy as a system within which it will be possible rapprochement between the activities of TNCs and national economic space, as between them, of course, there is a unity of interest and controversy. TNK their economies will promote regional networking and organizational structure of the economic markets, leading to a convergence in the region.
TNCs can work “together with other government and civil society actors, working with the international institutions to contribute to the solution of social, environmental and humanitarian issues” (Luo, 2005:177). This encourages them to demonstrate public accountability and the desire to protect from negative public opinion and economic risk. Such way, we need an intensive dialogue between TNCs and civil society.
It is essential that the regional leadership paid great attention to new technologies, focused on innovation in scientific research and education. It is necessary, that in these processes will be included in their region, the scope and results of participation, as globalization of research activities will bring them indigenous technological and innovative capabilities. In this field should be a variety of sources to raise funds and cooperation with business entities. It is also necessary to develop the administrative capacity by improving the quality of education in order to increase their participation in the sector of the economy, which is characterized by a steady increase in demand and the development of skills. The government should pay special attention to the development of institutional infrastructure of the country and to ensure increasing skilled human resources. In the Caucasus market institutions and infrastructure are not developed properly, but rich in cheap labor, however, does not possess the necessary skills to manage modern technology. The government should conduct ongoing monitoring of the investment environment, its evaluation, pay attention to how the factors that contribute to the inflow of foreign investment activities of TNCs and promote economic growth, resource use to improve efficiency, the introduction of innovative technologies. The States of Georgia, Armenia and Azerbaijan must create the appropriate structure for operation and take into account the principles of optimal investment opportunities. These arrangements should cover not only the industrial sector of the economy, but also the regions with traditional-agrarian industries and sectors. Also require continuous monitoring by the state for fixed capital investment, given the relationship between local and foreign investments. The priorities of economic development must become the basic mechanisms of public investment.
It is interesting for us, that the states in the Transcaucasian region (Georgia, Armenia and Azerbaijan) have great potential in the agricultural sector. It is necessary that during the development of investment policy to take into account certain countries in the region incentive mechanisms to attract the industry more investment. According to some experts, in the future there will be increase the interest of foreign companies in this sector worldwide. Held in accordance with government policy can revive the world economy. True, in recent years, noticeable increase in investment in agriculture, but they are not sufficient for the end of this trend. Consider it expedient to provide accessible information activities of foreign companies and transnational corporations for civil, non-governmental sectors, to study the social conditions of employed persons and, in general, and establishing quality criterion of social responsibility. For the development of economic stability states of the region should pay more attention to the labor force in the dynamics of the international movement, the issue of migration from the state, development of legislative base, and an actuator for solving this problem.
It is needful to improve the legal system, which will be directly related to the entry and activities of foreign companies in the state. It is necessary to eradicate the bureaucratic and institutional barriers. Desirable to carry out effective changes in the tax code, in particular, is real and not declarative to cut taxes on business activities, both local and foreign manufacturers. It is necessary to create the adjusted legislative base and tax system, as well as the need to introduce certain benefits to the region was attracting TNC investment that will revive and will provide economic development in the countries of region.
From the above-mentioned we may conclude:
- Investment environment of the Transcaucasian countries, despite the current situation and the activities carried out, there are still a little attractive. On this there are many reasons, including political, economic and legal ones;
- Much attention is paid to these issues, the establishment of ways of solving them, respectively, attract investment and develop mechanisms to increase efficiency; appropriate countries of the Caucasus to assess the investment potential and, therefore, to carry out institutional activities in order to create an investment environment to strengthen the activities of TNCs, and should be clearly defined place and role of the investment market in the region's economies, to form an optimal vision of promoting foreign and domestic investments;
- Should be examined risk projects and find ways to reduce them; analyzed the methodological issues of economic efficiency of investments and reserves identified for their growth. Liberalization of the economy Caucasian countries should be the basis for the revitalization of the TNC, unnecessarily; they will create the conditions for accelerating the consolidation of the region, but under the influence of economic liberalization deepens the permeability of boundaries, the relationship of markets, the relationship of the countries - the processes of internationalization, transnationalization and globalization.